In a move that monetizes the real estate value of one of its prime locations, embattled Sears Holdings Corp. announced Thursday it would carve up and share its King of Prussia mall anchor with retailer Dick's Sporting Goods.
Terms of its sublease were not disclosed, nor was a time frame for when Dick's would move in. But Sears said it would continue operating its department store on the first floor of the two-story, 215,000-square-foot anchor at the East Coast's largest shopping mall, and that Dick's would occupy parts of the second level.
The novel arrangement, at a mall with typically few vacancies for large new retailers, follows a holiday season in which sales at the company's chains, Sears and Kmart, continued their decline.
"I think it's a phenomenal opportunity for Dick's Sporting Goods because they've landed at King of Prussia mall. It's ground zero," said broker Steve Niggeman, principal with Metro Commercial Real Estate Inc., who represented Sears, based in Hoffman Estates, Ill.
Spokespeople for Sears and Dick's did not respond to requests for interviews, and mall owner Simon Property Group deferred queries to the retailers.
Sears framed the deal as exemplifying efforts to retool the 2,500-store company while capitalizing on its vast real estate.
"The sublease agreement with Dick's Sporting Goods is a great example of Sears Holdings' selectively redeploying its asset base to dramatically improve our retail shopping experience while working to create shareholder value," Alan Shaw, vice president of real estate leasing and development, said in a statement.
For several years, equity investors and rival retailers have watched closely to see what Sears might do with its leased and owned anchors, given the corporation's troubles.
Share values fell yet again last week on disclosures that comparable-store sales declined 9.2 percent at Sears and 5.7 percent at Kmart during the quarter ended Jan. 6.
"The results that we posted are not nearly what we want them to be," chairman and chief executive Eddie Lampert said in a blog post Jan. 9. But the results, he added, obscure progress in the company's transition away "from a business that has historically focused on running a store network."
Niggeman, who helped Target end its own years-long search for a King of Prussia location by finding a site that will open this year at a nearby shopping center on Route 202, said Dick's had been looking for a long time.
"This partnership will be a win-win situation for our respective customers," Dick's real estate director Dan Chadwick said in a statement.
Both retailers will have their own parking-lot and mall entrances. Dick's will be accessible from the highly visible lot that faces Nordstrom Rack, which currently leads into the upper level of Sears.