Trump Goes Hollywood

Donald Trump surveys the grounds of Trump National Golf Club Los Angeles

Today NBC announced that the sixth edition of "The Apprentice" will take place in Los Angeles. While Manhattan unquestionably epitomizes "big business," it's good to see the Left Coast recognized as an economic powerhouse worthy of attention by developer-turned-reality TV icon Donald Trump. "The Donald" is no stranger to the City of Angels. Over a decade ago, he brashly proposed building a gigantic skyscraper on the site of L.A.'s historic Ambassador Hotel; more recently, he acquired a golf course on the Palos Verdes Penninsula and flirted with the idea of buying the Transamerica (now SBC) Tower in Downtown.

The change of setting to "the entertainment capital of the world" is probably driven by the Peacock's desire to boost the flagging ratings of "The Apprentice," whose current run garners 4 million fewer viewers than the last. Despite the decline in its popularity, the show is still one of NBC's most appealing for the key demographic of young adults and a linchpin of its Thursday night line-up. Currently ranked at a dismal fourth place in viewership among the major networks, the Peacock is willing to try almost anything to generate excitement and advertising revenue.

My loyal readers know I am an unabashed Trump fan. Frankly, I'm tempted to apply for a spot on the sixth edition of "The Apprentice," as I'll have "home court advantage" as an Angeleno. My main concern is that, if selected, I will undoubtedly make a fool of myself in front of a national TV audience at some point, but I figure by next fall no one will be watching anyway. My dream would be to sell Mr. Trump on the idea of investing in redevelopment in South Los Angeles...not bloody likely.

Tempe Grows Up

Momz recently tipped me off to the latest doings in my hometown of Tempe, Arizona. The City Council has given its blessing to four condominium towers with a total of 788 residential units in the Downtown area. This mega-development is the latest addition to the mixed-use Centerpoint redevelopment project along Mill Avenue between 5th Street and University Drive.

Like many long-time residents of Tempe, Momz recognizes the scope and scale of this project is unprecedented and will forever change the face of the Downtown district. Tempe will be casting a more cosmopolitan and urbane image, a remarkable achievement when one considers the city's humble origins as a a ferry crossing across the Salt River and its recent past as an archetypical post-World War II suburb.

City leaders supported the Centerpoint Condominiums because the mega-development establishes a new template for continued growth. Tempe is "land-locked," meaning that its territory is bound by other municipalities on all sides and contains very little vacant land for new development. Expect the densification of Downtown to be followed by the rejuvenation of older commercial strip centers along the major roads. The City's recently adopted a General Plan encourages mixed-use developments at these sites, unlocking their potential to become both commercial and residential nodes. Bucking the trend of urban sprawl in the Salt River Valley, Tempe is growing up, not out.

While I understand that the addition of over a thousand new residents to an already congested area will have some negative impacts, I think it's useful to compare the Centerpoint Condominiums to the propsect of another 788 single-family homes in a master-planned golf course community out in the surrounding desert. It's obvious that the pace of sprawl in greater Phoenix is unsustainable and destroying too much natural habitat; it's time to invest in the core and "first ring" suburbs like Tempe.

The consturction of the condominium towers will contribute to Downtown Tempe's continued success, as meshes nicely with other recent improvements. The Valley Metro light rail transit line will soon link Downtown and nearby Arizona State University with Sky Harbor Airport and key employment centers in Phoenix, providing a viable commuting option. Redevelopment efforts over the last 25 years have made the district into a regional dining, shopping, and entertainment destination. Tempe Town Lake has proven to be a major recreational amenity as well as an economic engine, with ongoing real estate development along its "shores." There's even renewed hope that the vacant but historic Hayden Flour Mill will find a new use. Taken together, these projects represent a bright urban future for my hometown.

Read on:

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Tempe council approves height boost for condos

Katie Nelson

The Arizona Republic

Nov. 19, 2005 12:00 AM

TEMPE - The city's tallest buildings are slated to rise over the heart of Mill Avenue after city approval of a height change.

Centerpoint Condominiums will have three of four condo towers at 30 stories, which will tower 39 feet over than the highest man-made town structure, Sun Devil Stadium.

At a Thursday night City Council meeting, the developers agreed that in exchange for the height approval, they would return the $2.7 million in incentives Tempe had given them. It hasn't been determined exactly how, but the money could come in the form of parking spaces, traffic calming devices for the surrounding neighborhoods, space on top of one of the buildings for police and fire radio equipment, or refurbished sewage lines.

More than a dozen community members spoke both for and against the high rises at Maple Avenue and Sixth Street. Most supported the added floors.

Construction on the condos has begun.

The vote was 5-2 in favor of the height change. Four council members raised questions about why the height addition was necessary. Two of the four buildings are already approved to be 22 stories, with the other two approved at 15 stories. The council members pounded city staff on how Tempe's police, fire, sewage, and roads would handle the influx of 140 new people the additional stories will likely bring.

Members Ben Arredondo and Len Copple voted against the approval.

Mayor Hugh Hallman, who favors the added height, said the towers will fix the "fundamental flaw downtown" by integrating housing into the mix that is dominated by bars and restaurants.

It's one thing to have visitors who visit the downtown district on weekends, he said, but "this brings people downtown permanently."

Approval for the additional stories will result in 70 more luxury condos. In total, there will be 788 units; of those about 120 have sold.

Representatives of Avenue Communities, the developer of the project, said the extra floors are needed because the cost of construction has increased 80 percent over the past 18 months. Ken Losch is one of the key Avenue Communities developers in charge of getting the buildings into the ground. He called the height addition process "painful" but said it will be worth it in the end.

"We see Tempe becoming a world-class environment," he said. "It'll be on par with Miami's South Beach in the next 10 years."

Losch intends to take full advantage: His parents plan to move from the Grayhawk neighborhood in north Scottsdale to downtown Tempe. And, for himself, he has reserved one of Centerpoint's penthouses.

Whither Whole Foods?

Whole Foods Market, Time Warner Center, Manhattan

Today Curbed LA noted that the future location of a Whole Foods Market in "the eastern part of Hollywood" has become "the cocktail party conversation/conjectural item du jour." The rumors surrounding the arrival of the upscale grocer are indicative of the ongoing revitalization occuring in greater Hollywood. Although redevelopment in the area has been largely successful, Hollywood's compelling story is constantly eclipsed by the better-publicized "renaissance" in Downtown.

As recently as 10 years ago, the neighborhoods of Hollywood weren't desirable, with some of the most blighted and crime-infested streets in the entire city. Parts of East Hollywood were affected during the 1992 riots when several buildings burned to the ground. The decline had been disastrous for the area, once considered a fashionable suburb and the former home of numerous broadcast facilities and a business district that rivaled Downtown's.

Fortunately, there was hope for Hollywood. The City established two redevelopment areas in greater Hollywood and the Los Angeles County Metropolitan Transportation Authority (Metro) built the Red Line subway through the heart of the district. Sadly, Metro initially did more harm than good, as shoddy construction practices created a sink hole on Hollywood Boulevard near Barnsdall Park and caused the stars along the "Walk of Fame" to buckle.

Redevelopment efforts were tied to the new subway stations, creating the city's first truly transit-oriented districts. The most expensive and bally-hooed project, the massive Hollywood & Highland, is a retail/entertainment complex that includes a Renaissance Hotel and the Kodak Theatre (home to the Academy Awards). The center stumbled by initially orienting itself to tourists exclusively but is slowly bouncing back by offering stores for local residents such as the recently-opened Virgin Megastore.

Further east in the central district, Sunset & Vine includes a Borders Books, other shops and restaurants, and dozens of apartments. Nearby are The Dome, a retail and entertainment center built around the iconic Cinerama Dome, and the Amoeba Music superstore.

In East Hollywood, the Hollywest Promenade at Hollywood and Western includes Ralphs, Ross, several stores and restaurants, and a tower of senior apartments. Across the street, the Metro Hollywood Apartments lies atop the subway station and includes street-level retail. A few blocks away, the Views at 270 project brought affordable apartments and a Walgreens to a run-down property that included a porno movie theatre.

Regretably, this revitalization has entailed a degree of gentrification. The "new" Hollywood has attracted a large number of young professionals who favor walkable, transit-accessible neighborhoods (including yours truly). Rents have risen rapidly, a volatile situation evidenced by the crowds of people waiting in line to apply for the affordable units at Views at 270 last spring. While many neighborhoods are still "rough around the edges," the talk about Whole Foods speaks of a new era in Hollywood, proof to many residents that area has finally "arrived."

While the interest from chains like Whole Foods, Borders, Ralphs, and Virgin Megastore is somewhat flattering, the influx of new retailers threatens many locally-owned small businesses; to wit, the demise of Aron's Records. Urban redevelopment and "revitalization" creates negative externalities for existing residents and business owners that must be recognized and mitigated.

Having tried to explain the "why," I will move on to the question of "where." Last month I reported on the "Save the Derby" effort, which is fighting to prevent the redevelopment of the former Brown Derby restaurant at Los Feliz and Hillhurst. The following rendering of Adler Realty's proposal for the site clearly shows Whole Foods as an anchor:

Rumor has it that Whole Foods was scared away from the site after witnessing vehement opposition at a town hall meeting. If Whole Foods wants to be in Hollywood, there's a good chance the company will find another (less controversial) location.

Curbed LA reports that Whole Foods may land near Hollywood and Vine. A Red Line stop, the Pantages Theatre, Sunset & Vine, and The Dome are all nearby, and a major transit-oriented development featuring an upscale W Hotel is in the works. While this location is in a thriving area, it is not as near affluent neighborhoods as the Los Feliz site.

The second location mentioned by Curbed LA is a "hot tip" from "the guy behind the seafood counter at the Whole Foods at 3rd & Fairfax": Hollywood and Western. I happen to live very near this intersection, one of the new transit-oriented nodes developed within greater Hollywood. I doubt that the grocer will open in my neighborhood.

The only possible site for the store is the northwest corner of Hollywood and Western, which is targeted for redevelopment by the City's Community Redevelopment Agency (CRA). Here's a photo I took in June:

While the property could contain a higher-density mixed-use project with some retail, it seems too small to accomodate the parking and loading areas necessary for a large grocery store. There's already a Ralphs across the street and two other supermarkets (Food 4 Less and Farm Fresh Ranch Market) are a few blocks away. Within a mile are also a Mayfair Market and a Jons Marketplace. While each of these stores is oriented to a different clientle, economics dictate that the local market would be over-saturated if served by so many grocers.

A store at Hollywood and Western would be easily accessible to the region's wealthier residents in Los Feliz and the Hollywood Hills, an advantage over a location near Hollywood and Vine. I could be wrong on this one; it should be interesting to see how the Whole Foods saga plays out.

Bye Bye King Tut

The King Tut exhibition at the Los Angeles County Museum of Art (LACMA) ends at midnight tonight. I had the pleasure of viewing this breathtaking compendium of anicent artifacts back in August; it was an experience I will never forget.

Parking at a Premium

The Downtown Los Angeles housing boom began with the conversion of largely vacant office buildings in the Historic Core district into apartments and condominiums. Now that the Historic Core has matured, development activity has shifted to brand-new buildings in the South Park district and to the conversion of relatively new office buildings that are no longer economically viable.

The 1100 Wilshire building was built in 1986, a speculative endeavor that banked on the growth of a nascent "City West" corporate center across the Harbor Freeway from the Bunker Hill Financial District. A subsequent crash in the office market prevented "City West" from being realized and 1100 Wilshire found itself in a somewhat isolated location.

Aside from its questionnable location, 1100 Wilshire suffered from a questionnable design. The building was never able to attract more than a handful of tenants.

The building consists of 15 floors of structured parking topped by a 22-story mirrored glass tower with an awkward shape. Many Angelenos consider it an eyesore:

Photo from you-are-here.com

In 2004, Forest City Enterprises, a major player in the Downtown residential boom, acquired 1100 Wilshire with plans to convert it into high-end condominiums. At long last, it seems the building might find a purpose.

It turns out the condos aren't the only thing for sale; parking spaces are too. Forest City is charging $15,000 to $20,000 for each space in the parking structure, a common practice in cities like New York and San Francisco but nearly unheard-of in Los Angeles. While people have become accustomed to "free parking," economists, urban planners, and politicians are beginning to recognize that the provision of "free parking" raises the cost of new housing substantially and is not a sustainable zoning practice.

I am encouraged by this development, as I think it moves our city in the right direction. The costs of housing and parking must be seperated, lowering rents and mortgage payments for those who choose not to drive. We need to create economic incentives for transit use that will make transit-oriented development more appealing to a wider section of the market. The resultant reduction in automobile traffic will work toward many important regional goals.

Angelenos should be concerned that lower-income people might become "priced" out of the parking "market." The problem with "market-oriented" traffic congestion solutions such as the sale of residential parking and freeway toll lanes is that a day may come when only the rich can afford to drive and park in this town. Public transit just isn't a viable alternative for many people in Los Angeles regardless of their income though the Metro system continues to improve.

For more information, read the following article from today's Los Angeles Times:

Want Deed to Park Place?

End of an Era

J.W. Robinson Company (later Robinson's)
Seventh Street and Grand Avenue, Los Angeles

A. Hamburger & Sons (later May Company)
Eighth Street and Broadway, Los Angeles

The merger between Federated Department Stores and May Department Stores will soon result in the loss of Los Angeles's last local department store chain, Robinsons-May. Although the chain and its predecessors (Robinson's and May Company) have long been part of national conglomerates, it retains a headquarters in North Hollywood and descends from two of the most legendary emporiums in the city's history.

For decades, four Downtown department stores (Bullock's, May Company, Robinson's, and The Broadway) dominated the Southern California retail scene, though after World War II competition among them rapidly shifted from the urban core to the suburbs. All of the original emporiums eventually shuttered, with some of the retailers relocating to smaller Downtown stores in urban malls (Macy's Plaza and 7th + Fig). The associated headquarters jobs were moved elsewhere in Southern California or the nation. The death of the Robinsons-May is a significant event for Los Angeles, as it tells a story of corporate consolidation in modern America; like Bullock's and The Broadway before it, the last local department store chain has been absorbed by Macy's, a Cincinnati-based retailer with a New York City name.

I'm glad I'm not the only one who can appreciate the significance of the Federated-May merger to Los Angeles. Today the Los Angeles Downtown News ran an excellent article cataloguing the history of Los Angeles's formerly great department stores that I'd like to share. If you're interested in this topic, I suggest "City Center to Regional Mall" by Richard Longstreth and previous P.U. posts.

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Before The Mall

When Local Department Stores Ruled Los Angeles

by Max Pierce

The announcement in September by Federated Department Stores that the Robinsons-May buying division will be consolidated into the San Francisco Macy's leaves Los Angeles without a major department store headquartered here for the first time in more than a century. It also puts an asterisk on an industry that has a long and storied role in Downtown.

The acquisition of May into Federated, advertised as a friendly merger between rivals, also spells the end to local buying in Houston, Boston and Arlington, Va. With close to 1,100 jobs affected by this decision, the ripples through the local industry as store locations are closed will no doubt continue for years. Warehouse operations will be consolidated and wholesale suppliers in the Fashion District will feel the pinch.

Such was not always the case. A flip back to the '80s - the late 1980s, that is - reveals a Los Angeles with a vibrant department store community and four major stores operating and/or headquartered Downtown.

J.W. Robinson's, originally known as The Boston Dry Goods Store and in Los Angeles since 1883, opened a "new" building at Seventh between Grand and Hope in 1915. In 1934, the building's exterior was updated to the Art Deco look that remains intact today.

In 1896, Arthur Letts, an English immigrant, purchased a bankrupt store at Broadway and Fourth, which was named after the street it faced. In 1907, concerned with business at The Broadway, he set up a favored employee, John G. Bullock, in a new location at Seventh and Broadway, which would be called Bullock's. Both stores thrived, with an expanded Broadway store opening around 1913 and Bullock's growing from one building to several, encompassing real estate along Seventh, surrounding the historic St. Vincent's Court and up Hill Street. Upon Letts' death in 1923, Bullock and business partner P.G. Winnett purchased the Seventh and Broadway location and Bullock's became independently owned.

One block south of Bullock's, A. Hamburger Son and Company operated an enormous store at Eighth and Broadway, which boasted "the largest aisle in the West," stretching from the Broadway door to the Hill Street entrance one block away. A marriage merged the Hamburger and May families and resulted in The May Company expanding to Los Angeles.

With rooftop restaurants offering stunning views of the city, fur salons, bargain basements, merchandise ranging from books to brassieres to batteries, and elegant windows decorated for Christmas, the Downtown department stores, with local buyers traveling both around the world and over to the California Mart (now California Market Center), helped drive the Downtown economy through the 1960s. Robinson's and Bullock's catered to the affluent Angeleno, with a separate buying office for Bullocks Wilshire housed in that location, while The Broadway and May Company targeted a broader, more value-driven customer.

This marketing to specific shoppers was evident in each store's ad campaigns. Women's apparel couldn't merely be called "clothing," but was promoted with often-cryptic monikers reflecting the store's identity; there was Boulevard or Robinaire Sportswear, California Attitudes, Pacesetter, Club 5'4", Lady Bullock and so on.

With the rise of suburban malls, the Downtown stores began competing with their own branch locations, and the loss of a comprehensive transit system furthered the push to spacious mall parking. After 60 years, The Broadway relocated in 1973 from Fourth to Seventh, then a viable shopping street and across from Robinson's, into what is now Macy's Plaza. By 1986, Bullock's and The May Company had closed their original stores, but faithful to Downtown, reopened in smaller venues inside Seventh Market Place (now 7+Fig).

In 10 years, all that changed again. Despite the profitability of the local divisions, there were numerous corporate consolidations fueled by junk bonds, leveraged buyouts and bankruptcies. The parent of Robinson's was bought by the May Company, which eventually merged the two local chains and shuttered the Seventh Street store. Unable to decide whether they were upscale Robinson's or middle class May, they chose a hyphenated name that reflected neither culture. Bullock's was acquired by Macy's, which downgraded the merchandise and unceremoniously closed numerous locations including Bullocks Wilshire and the 7+Fig location. After years of teetering on the edge of extinction due to flawed management, The Broadway was bought by Federated, which had absorbed Macy's. Both the Bullock's and Broadway names were retired in favor of Macy's and Bloomingdale's.

Interviewed on NPR, Federated CEO Terry Lundgren, who ironically spent a majority of his retail career at Bullock's and Bullocks Wilshire, defended the elimination of regional store names as a critical move to insure profitability, and dismissed naysayers as heavy on nostalgia and light on spending. In fact, the loss of regional headquarters causes the stores to abandon the customer, not the other way around.

As it undergoes a residential and cultural renaissance, Downtown Los Angeles may ultimately lose the Robinsons-May, the Macy's, or both, though it should be noted that the parent company has made no public statement about such a move. But for nostalgic shoppers who have already gone elsewhere, the loss of a generic Macy's has little to do with the great Los Angeles stores that shaped the city's culture.

Max Pierce is a former department store executive well versed in mergers and acquisitions. Today, he writes on Los Angeles and Hollywood history for numerous publications and gives tours of the city's historic areas.

Whatever Happened to...?

Downtown's historic department stores may be gone, but their buildings linger on with new identities. Sort of like a young woman wearing her grandmother's vintage dress. Here's a rundown.

The Broadway Department Store, at Fourth and Broadway: Now the Junipero Serra Building, an office structure.

Bullock's, at Broadway, Hill and Seventh: The original 1907 structure now houses parking. The remaining complex of buildings is mostly home to the St. Vincent Jewelry Center. Within the charming St. Vincent's Court, which feature several multi-ethnic outdoor cafes, the original Bullock's logo still graces an archway. On Hill Street, an Art Deco façade for the former Bullock's Men's Store dates from 1934. Two floors of another Bullock's at 7+Fig are now Gold's Gym.

The May Company, Broadway at Eighth: The first floor is home to the Broadway Trade Center. Peek under the giant rubber mats at the entrances to find the May Company logo in an elegant Edwardian script within the terrazzo. On the second level of the exterior, the terra cotta "H'' recalls the building's earliest days as Hamburger's. Along Ninth, a sign still directs drivers into the "May Co Garage" at the southeast corner of Hill.

J. W. Robinson's, Seventh, Grand and Hope: A Rite-Aid and the South Group's loft leasing office flank opposite ends of this building.

Barker Brothers, 818 W. Seventh St.: Not a traditional department store, but at its peak an Angeleno favorite featuring 10 floors of home furnishings. Today a mixed office and retail complex, the windows flanking the entrance continue to promote "Floor Coverings" and "Fine Furniture" in stylized gothic metal lettering. It is expected to become housing.

A pre-1913 image of the original Broadway, at Broadway and Fourth Street. It was one of several major department stores in Downtown. Historic postcard from the collection of Marlene Laskey.

Is Sears Stumbling?

Last week Steve's Blog featured an article about Sears Holdings Corp. that I'd like to share here. It appears that the company is struggling in its recent attempts to remain relevant in today's ultra-competitive retail environment.

Kmart Holdings Corp. acquired Sears Roebuck & Co. in March of this year but the combined company assumed Sears' name as well as its headquarters in Hoffman Estates, Illinois. The merger was orchestrated by financial whiz Eddie Lampert, who brought Kmart out of bankruptcy and turned it into a Wall Street darling by selling off scores of the company's underperforming units. By unlocking the value of Kmart's extensive real estate holdings, Mr. Lampert amassed the pile of cash necessary to acquire Sears.

The management at Sears was compelled to sell out to Kmart because it had already decided to move the company into "off-mall" locations. Before the merger, the venerable retailer had opened a few experimental Sears Grand units (massive big-boxes not unlike Wal-Mart's Supercenters) and acquired 56 former Kmart and Wal-Mart stores. Sears was wise to realize it would suffer if it continued to hitch its wagon to conventional malls, as it has done for 50 years; not only are fewer and fewer malls being built each year, but the company's target customers are more comfortable shopping in big-box stores these days. Kmart's remaining stores presented a golden opportunity for Sears to move into big-box retailing in a big way. The merger seemed a "win-win" for all involved.

Shortly after the merger was consumated, the "new" Sears announced that, within 3 years, 400 Kmart stores would be converted into a new format called Sears Essentials. The Sears Essentials stores, about half the size of the new Sears Grand units, would combine Kmart's strengths in pantry (food), HBA (drug store merchandise and cosmetics), pharmacy, and garden centers with Sears' more valuable brand and its expertise in appliances (Kenmore) and hardware (Craftsman). Retail observers noted the overlap between Sears' mall stores and Kmart's "off-mall" units. Mall owners were delighted by the assumption that Sears would close some of its "mall-based" stores as a result of its big-box push because the vacated square footage could be put to more profitable uses. The prospect of Eddie Lampert selling off a large portion of the combined company's "underperforming" stores also excited Wall Street.

When I wrote about Wal-Mart in June, I predicted that Kmart's name was so tarnished that it would vanish from the retail scene within 5 years, the strongest of its stores having been converted to the Sears Essentials format. I felt that if any mass-merchandise chain could hope to compete with Wal-Mart and Target, that chain would be Sears, but I also stated that if the company didn't execute its "off-mall" push perfectly, it would go the way of fomer rival Montgomery Ward.

Recent observations (summarized in the following article) lead me to believe that the Kmart-Sears merger is not bearing any fruit. Few customers percieve the new Sears Essentials stores as offering a decidedly unique shopping experience, a fact that prevents the format from being considered a serious competitor to the big-box giants. While the company has bragged about its success with Sears Grand, it has been eerily silent about the results at Sears Essentials and whether the company will remain true to its ambitious Kmart conversion plan. Furthermore, investors have grown impatient with Eddie Lampert's reluctance to sell large chunks of "underutilized" real estate, the proceeds from which could be used to fuel other investments.

In the end, Eddie Lampert may prove to be a better investor than a retailer. Both Kmart and Sears have been on a downward spiral for years, and the merged company may not be worth more than the sum of its parts. Alas, the real estate owned by Sears Holdings seems to be more valuable than its store operations. While there is still hope that Sears can become a major competitor to Wal-Mart and Target, I wouldn't bet on it.

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Rumors of stalled Sears strategy grow

October 25, 2005

BY SANDRA GUY Business Reporter

Chicago Sun-Times

A Wall Street analyst gave voice Monday to rumors that Sears' ballyhooed strategy of building new stand-alone stores is in trouble.

Sears is counting on its newest store, Sears Essentials, to compete with big-box rivals such as Target, Kohl's and Wal-Mart, while also selling refrigerators, treadmills, lawn mowers and patio furniture.

Sears has denied reports that it is slowing or halting its plans to convert 400 Kmart stores into Sears Essentials stores within three years -- at a cost of about $3.5 million per store. But Sears hasn't yet announced how many Sears Essentials stores it will open in 2006.

Furthermore, two top Sears executives integral to the strategy have left or are leaving the Hoffman Estates-based retailer, Gregory Melich, an analyst at Morgan Stanley & Co., said in a note to investors Monday.

Catherine David, a former Target executive that Sears named to oversee Sears Essentials and two other stand-alone stores, left the retailer in September.

Sears hired David in July 2004 to turn around the struggling Great Indoors home-decor chain, which Sears had downsized a year earlier to 17 stores.

Sears also is losing Luis Padilla, another former Target executive and a merchandising whiz credited with putting the "chic" in Target's "cheap chic" reputation. Padilla is leaving at month's end, following Sears Chairman Edward S. Lampert's decision to install his own top strategists.

Furthermore, Sears is investing less than its retail rivals in its stand-alone stores, and has cut its advertising by more than 40 percent, Melich wrote.

More than 50 percent of Sears Essentials stores are within five miles of a Target, a Lowe's or a Home Depot, giving them tough conditions under which to compete, he said.

Other analysts have questioned the Sears Essentials format as unfocused and underwhelming.

"The store seems a hodgepodge of everything, and there's no clear message to consumers about what to expect," said Kim Picciola at Chicago-based Morningstar.

John Melaniphy III, a Chicago real estate expert at Melaniphy & Associates, said Sears has been noticeably silent about Sears Essentials' performance, in contrast to its bragging about exceeding expectations with Sears Grand, the company's largest stand-alone stores that are twice the size of a Sears Essentials.

Investors were hoping Lampert, a billionaire hedge-fund whiz, would have dropped any designs he had on retailing and sold much of Sears' real estate to turn a quick profit.

As time goes by, investors have gotten impatient. Analysts had estimated that Sears' stock would climb to $169 to $200 by year's end if Lampert sold assets. The stock ended the day Monday at $125.07.

Sears will open 49 Sears Essentials stores by year's end.

In Chicago's suburbs, Sears has converted former Kmart stores in northwest suburban Palatine and in southwest suburban Homer Glen to the Sears Essentials format. A Sears Essentials will open this weekend in west suburban Elmhurst.

Said Neil Stern of Chicago's McMillan Doolittle consultancy, "It's critical to the future of the company as a retailer to make this [Sears Essentials] work."

Crash On the Orange Line

Uh oh. Earlier today, an Orange Line bus was involved in a major collision that injured 15 people. Considering that today is only the fifth day of regular service on the new transit system, this incident is a bad omen that may discourage ridership. Let's just hope such events do not become commonplace. The following is a report from the Los Angeles Daily News Web Site:

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15 people injured in first major Orange Line Busway crash

By Daily News Staff and Wires

VALLEY GLEN -- Fifteen people were hurt today when a passenger car collided with an Orange Line bus, the first major accident on the San Fernando Valley's new transit system, officials said.

The crash occurred when a Toyota Camry driven southbound on Woodman Avenue by a 78-year-old woman slammed into an Orange Line bus crossing Woodman on the busway, officials said.

"The bus cleared the intersection on a green light, and the car ran a red light and collided with the bus," said Richard Hunt, the MTA's general manager for the San Fernando Valley. "It hit the bus twice."

The driver of the Camry suffered injuries to the chest area and was transported to a local hospital, where she is in stable condition, Fire Department officials said. At least thirteen passengers on the bus were also taken to local hospitals with minor injuries. It was not clear if the other injured person was on the bus or in the Camry.

The Orange Line continued service, but diverted its course off the busway between Woodman and Oxnard. The busway reopened at 3:45 p.m.

Another busway accident occurred earlier in the day near Corbin Avenue when a woman driving a passenger car made a right turn on a red light and struck an Orange Line bus. A fare checker on the bus suffered minor injuries.

Bon-Ton Buys a Piece of Saks

Yesterday Bon-Ton Stores, Inc. announced that it would acquire the "northern department store group" of Saks, Inc. for $1.1 billion in cash and $85 million in assumed debt. Bon-Ton, a regional department store chain headquartered in York, Pennsylvania, will more than double in size as a result of this merger, the latest in a string of consolidation across the many sectors of American retailing. The company currently operates 136 stores in 16 Northeastern and Midwestern states under the Elder-Beerman name as well as its own banner.

Bon-Ton will soon control the following chains in the Upper Midwest and Great Plains regions:

Bergner's (14 stores in Illinois)

Boston Store (10 stores in Wisconsin)

Carson Pirie Scott (31 stores in Illinois and Indiana)

Herberger's (40 stores in Colorado, Iowa, Minnesota, Montana, Nebraska, North Dakota, South Dakota, Wisconsin, and Wymoning)

Younker's (47 stores in Illinois, Iowa, Michigan, Minnesota, Nebraska, South Dakota, and Wisconsin)

It's interesting to note that these stores were acquired in the late 1990's by Proffitt's, a regional department store chain that had long been a major presence in the South. Proffitt's changed its name to Saks, Inc. after acquiring legendary luxury retailer Saks Fifth Avenue in 1998. The combination of Proffitt's "middle market" department stores and Saks' "upscale" units was ultimately unsuccessful, causing the company to recently put most of its stores up for sale. Having sold its Proffitt's and McRae's "southern stores" to Belk earlier this year, the company will consist of its namesake Saks Fifth Avenue units and Off 5th outlet stores, the somewhat posh Parisian chain, and its Club Libby Lu specialty division once the "northern stores" are acquired by Bon-Ton.

Yesterday's announcement demonstrates that regional department stores are far from extinction. While Saks (nee Proffitt's) may not have had much success with its "middle market" divisions, Bon-Ton could become a major force in the department store sector once it acquires these units. The somewhat modest company has focused on small towns and rural areas; however, the acquisition of Carson Pirie Scott will bring it into Chicago, one of the country's largest markets. "Carson's" has long been the primary rival of Marshall Field's on State Street and elsewhere in greater Chicago -- if local residents make good on their threats to stop patronizing Field's once it is absorbed by Macy's as a result of the Federated-May merger, Bon-Ton could gain a lot of customers. Unlike Federated, Bon-Ton plans to retain all of its local nameplates, including Carson Pirie Scott, for the foreseeable future.

Carson Pirie Scott's flagship store on State Street in Chicago

Wal-Mart Goes to War

Robert Greenwald's newest documentary, "Wal-Mart: The High Cost of Low Price," premiered tonight in New York City. I've written many posts about Wal-Mart, so I'm certainly excited to see this film; it begins a theatrical run at Laemmle Theatre's Fairfax 3 in Los Angeles on Friday. While I'm hoping for a somewhat "fair and balanced" look at the world's largest retailer, I fear that this film will be nothing more than unabashed Wal-Mart "hateration," which is not entirely appropriate. While I certainly agree that there are many negative externalities associated with the company's rise in the United States, part of the blame for them rests with other big-box retailers and government policy. I am reminded of a trite but true adage: "Don't hate the player, hate the game."

In recent years Wal-Mart has been subject to an increasing amount of criticism; Mr. Greenwald's documentary is only the most recent attack on the company and its business practices. This "image problem" has led Wal-Mart's management to hire a sophisticated "propaganda machine" consisting of advisors to former Presidents and other politicians. Such a merger of retailing, marketing, corporate culture, and political "spin" is both fascinating and frightening. The following article from today's New York Times describes the "War Room" that has sprung up in the retail giant's headquarters in Bentonville, Arkansas:

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A New Weapon for Wal-Mart: A War Room

By MICHAEL BARBARO

Published: November 1, 2005

BENTONVILLE, Ark., Oct. 26 - Inside a stuffy, windowless room here, veterans of the 2004 Bush and Kerry presidential campaigns sit, stand and pace around six plastic folding tables. Open containers of pistachio nuts and tropical trail mix compete for space with laptops and BlackBerries. CNN flickers on a television in the corner.

The phone rings, and a 20-something woman answers. "Turn on Fox," she yells, running up to the TV with a notepad. "This could be important."

A scene from a campaign war room? Well, sort of. It is a war room inside the headquarters of Wal-Mart, the giant discount retailer that hopes to sell a new, improved image to reluctant consumers.

Wal-Mart is taking a page from the modern political playbook. Under fire from well-organized opponents who have hammered the retailer with criticisms of its wages, health insurance and treatment of workers, Wal-Mart has quietly recruited former presidential advisers, including Michael K. Deaver, who was Ronald Reagan's image-meister, and Leslie Dach, one of Bill Clinton's media consultants, to set up a rapid-response public relations team in Arkansas.

When small-business owners or union officials - also employing political operatives from past campaigns - criticize the company, the war room swings into action with press releases, phone calls to reporters and instant Web postings.

One target of the effort are "swing voters," or consumers who have not soured on Wal-Mart. The new approach appears to reflect a fear that Wal-Mart's critics are alienating the very consumers it needs to keep growing, especially middle-income Americans motivated not just by price, but by image.

The first big challenge of the strategy will come Nov. 1 with the premiere of an unflattering documentary. "Wal-Mart: The High Cost of Low Price" was made on a shoestring budget of $1.8 million and will be released in about two dozen theaters. But its director, Robert Greenwald, hopes to show the movie in thousands of homes and churches in the next month. The possibility that it might become a cult hit like Michael Moore's 1989 unsympathetic portrait of General Motors, "Roger & Me," has Wal-Mart worried.

So, Wal-Mart has embarked on a counteroffensive that would have been unthinkable even a year ago. Relying on a preview posted online, Wal-Mart investigated the events described in the film and produced a short video contending the film has factual errors. (Mr. Greenwald denies there are errors and says that Wal-Mart has not seen the final cut.)

Wal-Mart has also begun to promote a second film, "Why Wal-Mart Works & Why That Makes Some People Crazy," which casts the company in a rosier light. Wal-Mart declined to make its executives available for the Greenwald film, but it participated with the second film's director, Ron Galloway. The war room team helped distribute a letter, written by Mr. Galloway, that challenges Mr. Greenwald to show the two movies side-by-side.

To keep up with its critics, Wal-Mart "has to run a campaign," said Robert McAdam, a former political strategist at the Tobacco Institute who now oversees Wal-Mart's corporate communications. "It's simply nonsense for us to let some of these attacks go without a response."

Wal-Mart's aggressive new posture is a departure from its tradition of relying on an internal staff to manage the company's image. The war room, which is part of a larger Wal-Mart effort to portray itself as more worker-friendly and environmentally conscious, runs counter to the philosophy of the chain's founder, Sam Walton. Believing that public relations was a waste of time and money, the penny-pinching Mr. Walton would not likely have hired a public relations firm like Edelman, Wal-Mart's choice to operate its war room.

So what has changed? For one thing, Wal-Mart's critics have become more sophisticated.

For years, unions hurled little more than insults at the chain. But over the last year, two small groups - Wal-Mart Watch and Wake Up Wal-Mart - set up shop in Washington with the goal of waging the public relations equivalent of guerilla warfare against the company. Wal-Mart Watch received start-up cash from the Service Employees International Union; Wake Up Wal-Mart is a project of the United Food and Commercial Workers International Union. Unions have tried, unsuccessfully, to organize Wal-Mart's employees.

At the suggestion of Wake Up Wal-Mart, members of the nation's largest teachers' unions staged a boycott of Wal-Mart for back-to-school supplies this fall. Wal-Mart Watch, meanwhile, set up an automated phone system that called 10,000 people in Arkansas in June seeking potential whistle-blowers willing to share secrets about the retailer.

Wal-Mart did not rebut such attacks, even when Wal-Mart Watch released a 24-page report blasting the company's wages and benefits. Wal-Mart Watch said the report had been downloaded from its Web site 55,000 times.

Once a darling of Wall Street, Wal-Mart's stock price has fallen 27 percent since 2000, when H. Lee Scott Jr. became chief executive, a drop that executives have said reflects, in part, investors' anxieties about the company's image. Sales growth at stores open for more than a year has slowed to an average of 3.5 percent a month this year, compared with 6.3 percent at Target. And Wal-Mart is facing growing resistance to new urban stores, with high- profile defeats in Los Angeles, Chicago and New York.

There is some evidence that criticism is influencing consumers. A confidential 2004 report prepared by McKinsey & Company for Wal-Mart, and made public by Wal-Mart Watch, found that 2 percent to 8 percent of Wal-Mart consumers surveyed have ceased shopping at the chain because of "negative press they have heard."

The Greenwald movie threatens to make matters worse. It features whistle-blowers who describe Wal-Mart managers cheating workers out of overtime pay and encouraging them to seek state-sponsored health care when they cannot afford the company's insurance. And it travels across small-town America to assess the effects on independent businesses and downtowns after a Wal-Mart opens.

The film is a particular concern now that Wal-Mart is trying to move upscale, a strategy it hopes will appeal to higher-income consumers. In the last year, Wal-Mart has introduced a line of urban fashions called Metro 7, hired hundreds of fashion specialists to monitor how clothing is displayed in stores, and produced more polished advertising.

But for the fashion strategy to pay off, Wal-Mart must win over a group of shoppers who are sensitive to criticism of the chain's record - consumers, in the words of Wal-Mart's chief executive, "who are not worried about their next paycheck."

Hence the war room in Bentonville. Wal-Mart executives realized they were unprepared to react to what Mr. Scott began to call the most expensive campaign ever waged against a corporation. So the company quietly mailed a letter to the country's biggest public relations firms several months ago seeking their help in developing a response.

The contract went to Edelman, which assigned its top two Washington operatives to the account. Wal-Mart would not say what it is paying Edelman, nor would it allow interviews with the war room staff. Mr. Dach, who is active in environmental and Democratic causes, was an outside adviser to President Clinton during the impeachment battle. Mr. Deaver was President Reagan's communications director and the creative force behind Mr. Reagan's so-called Teflon image.

Edelman also dispatched at least six former political operatives to Bentonville, including Jonathan Adashek, director of national delegate strategy for John Kerry, and David White, who helped manage the 1998 re-election of Representative Nancy Johnson, a Connecticut Republican. Terry Nelson, who was the national political director of the 2004 Bush campaign, advises the group.

In turn, Wakeup Wal-Mart is led by, among others, Paul Blank, former political director for the Howard Dean presidential campaign, and Chris Kofinis, who helped create the DraftWesleyClark.com campaign.

Wal-Mart Watch's media team includes Jim Jordan, former director of the Kerry campaign, and Tracy Sefl, a former Democratic National Committee aide responsible for distributing negative press reports about President Bush during the 2004 campaign.

The war room staff arrives at Wal-Mart's headquarters, a short drive from a nearby corporate apartment where they live, by 7 every morning. The group works out of an old conference room on the second floor, christened Action Alley, the same name Wal-Mart gives to the wide, circular aisle that runs around its stores.

Three display boards are covered with to-do lists. One says: "Promote Week of 10/24/05: MLK Memorial Donation. Urban/blighted community plan." Two large maps show the location of Wal-Mart and Sam's Club stores across the United States.

The team starts the day by scanning newspaper articles and television transcripts that mention Wal-Mart. Next come conference calls with Wal-Mart employees around the country to plan for events. Whenever possible, Mr. McAdam said, the war room will try to neutralize criticism before it is leveled.

That was the strategy behind what Action Alley considers its first coup. In late September, after several unions broke off from the A.F.L.-C.I.O., the splinter groups announced they would hold a convention in St. Louis on a Tuesday.

Action Alley members, assuming Wal-Mart would be a target of criticism during the union gathering, arranged for Wal-Mart to hold its own news conference the day before. It invited three local suppliers, a sympathetic local official and a cashier to say that Wal-Mart had a positive effect on the community.

"If you look at many of the stories that were written about that overall convention, they've got our messages in them," Mr. McAdam said. "In the past, when we've just responded to something somebody else is doing, it's sort of 'you know, by the way, Wal-Mart says ...' We got ahead of this one."

A campaign atmosphere pervades Action Alley. A small bus with the words "Clinton-Gore" on the side sits on the table. When discussing Wakeup Wal-Mart, Wal-Mart Watch and the Greenwald movie, Mr. McAdam slips into political-speak.

"The people who show up at Mr. Greenwald's film are probably not swing voters," he said. "They are probably the true believers of their point of view and I doubt there is a heck of a lot we can do to change their minds."

Mr. McAdam continued: "They've got their base. We've got ours. But there is a group in the middle that really we all need to be talking to."