Publication Date: February 1, 2001 Page: A1 Section: NEWS Edition: Final

More than 350 Quad-City area people learned Wednesday that they need to start job hunting after Green Bay, Wis.-based ShopKo Stores Inc. announced that it is closing a total of 23 of its Midwest discount stores.

ShopKo's decision affects eight of 13 Iowa locations. Stores in Bettendorf, Clinton, Muscatine, Keokuk, Coralville and Spencer and two sites in Cedar Rapids will be shut down. In Illinois, five of 13 stores are affected, with sites in Moline, Galesburg, Macomb, Pekin and Rockford slated to be closed.

This marks the third time the Bettendorf location will be vacant. The location, at 1431 Kimberly Road, originally was a Target store until 1995 when a SuperTarget was built on Elmore Avenue, Davenport. The building then became occupied by a Jack's store in October 1997 until ShopKo bought out Jack's a month later. The Clinton and Muscatine locations also had been Jack's stores before the ShopKo purchase.

The Moline location, located at 2000 36th Ave., was a Turnstyle discount store from the early 1960s until 1978 when Venture discount stores took over the facility. The location later became a ShopKo store.

No one can predict what the full ripple effect of the closings will be, but a spokeswoman for Joevan Foods Inc., Bettendorf, which sits next door to the ShopKo store, said business there should not suffer that much.

"We lost a little business when Target went away, but I don't think we will be affected too badly at all by ShopKo's closing," Joevan assistant manager Kim Christenson said. "We have a good, loyal customer base, so as far as losing business because of ShopKo closing, I don't think that's going to happen. Joevan's is not going anywhere."

ShopKo's Bettendorf store employs 99 people, while the Clinton store has 84 employees. In Muscatine, 94 employees work at that store. The two Cedar Rapids' locations employ a total of 190. The Moline store employs 92 workers, while the store in Galesburg employs 87.

Additionally, the company's distribution center in Quincy, Ill., will be shut down.

All total, about 2,500 employees throughout Iowa, Illinois, Kentucky, Indiana, Kansas, Missouri and Nebraska will lose their jobs, including 136 people at the company's corporate offices and 41 people at the Omaha, Neb., headquarters of ShopKo subsidiary Pamida, another discount store company.

No specific date was given for when the closings will commence or how long they will take to complete.

Managers at Clinton's ShopKo had just heard from the corporate office Wednesday afternoon and still were stunned about the store's imminent closing. They declined comment when contacted Wednesday by the Quad-City Times.

Business at the store on Clinton's busy U.S. 30/67 suffered last year while major road renovations temporarily disrupted the main entrance to its parking lot. But staff members had noticed an upswing after the road was completed in time for holiday shopping.

Another blow was the arrival of Wal-Mart in May in west Clinton, which siphoned away many of the area's discount-shopping customers.

Managers at the ShopKo stores in Bettendorf and Moline also declined comment.

ShopKo's announcement comes on the heels of a dismal third quarter during which the company posted a more than $8.4 million loss.

The company announced Jan. 25 that it had secured a three-year, $600 million senior-secured revolving credit facility from Fleet Retail Finance Inc. This will replace ShopKo's existing senior bank facilities under which $293.4 million was still outstanding.

"This is the culmination of the review launched in November to re-engineer our capital structure and review the asset base," William Podany, chairman, president and CEO of ShopKo said in a press statement Wednesday. "When completed, the financing agreement announced last week and these actions position ShopKo well for what has become a challenging retailing environment. Although difficult for everyone involved, improving the productivity of assets and reducing debt is necessary for the ongoing vitality of the company and its employees."

Employees affected by the store closings will be offered severance packages and out-placement services in accordance with the company's guidelines.

Red flags were flying in early October when it became evident that sales were severely lagging. During an Oct. 5 news conference, Podany said there were a number of factors reeking havoc on ShopKo's performance. First, consumer liquidity was adversely affected by the rise in interest rates, the decline in refinancing activities and the record high level of consumer borrowing. Additionally, energy costs reached a 10-year high.

Podany said at the time that he was unhappy with Midwest sales, adding that "we will examine all stores, both Pamida and ShopKo, and we will make appropriate decisions ... by January we'll have a clear understanding if those stores are all cash-flow positive and all producing to our corporate contribution, to total profit."

During a Nov. 9 news conference, Podany said the company severely underestimated sales softness for October. Additionally, competition from other retailers continued to heat up.

Apparel sales were awful, he said, particularly in the Midwest. Heavy markdowns were common just to move merchandise through the stores.

Additionally, he said the purchase of Pamida occurred when the economy in parts of the country, particularly in the Midwest was beginning to decline.

ShopKo operates 394 retail stores in 22 states, primarily in the Midwest, Western Mountain and Pacific Northwest regions. Retail operations include 164 ShopKo stores in mid-sized and larger cities and 230 Pamida discount stores in smaller, rural communities. The company employs about 24,300 people. Its stock has been on a slow and steady climb since falling to $3.375 a share Nov. 10. It closed Wednesday at $10.99 a share, up $1.35.

Copyright 2001 by Quad-City Times , All rights Reserved.

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