Pamidas in Two Harbors, Ely and Ashland to become Shopko stores

• Pamida in Two Harbors

Most of the 193 Pamida stores, like this one in Two Harbors, are expected to become Shopko stores this year as a result of a merger announced Wednesday between the two retail chains. (Catherine Hannula / Lake County News-Chronicle)

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This year, more than 180 Pamida stores — including stores in Two Harbors, Ely and Ashland — will become Shopko stores.

Over the next 12 months, Pamida stores will undergo five-week makeovers to give them the Shopko look and feel, down to the brands carried, said Tara Powers, a Shopko spokeswoman.

“There will be (Pamida) liquidation sales,” Powers said. “The current merchandise will be sold. There will be brief period where the signage, fixtures and layouts are changed. They’ll end up with a very different look and feel. They will be very, very sharp-looking stores.”

And Shopko is spending $80 million to do it.

It’s the result of a merger between Shopko and Pamida announced Wednesday. The merger of the two Midwest-based general-merchandise chains will create one of the largest retailers in the country serving small and rural communities, company officials say.

The merger is expected to be finalized in mid-February, boosting the number of Shopko stores from 149 stores in 13 states to 350 in 22 states from the Midwest to the Pacific Northwest. No changes are planned for the current Shopko stores.

The combined company will keep the Shopko name and its Green Bay headquarters. Pamida, with $1 billion in annual revenues, is currently based in Omaha, Neb. Although it has 44 fewer stores, Shopko’s annual revenue is $2 billion, twice as much as Pamida’s, according to a company release.

This isn’t the first business deal between the two retail giants.

In 1999, Shopko Stores, Inc., bought the Pamida chain and operated it as a separate division. But that ended in 2005, when a major private investment firm bought Shopko, severing Pamida from Shopko’s corporate umbrella. Pamida then re-established its own corporate headquarters.

During the Pamida-to-Shopko conversions, stores will remain open.

“Most have pharmacies which will never close,” Powers said. “We will do one department at a time. But everything won’t be available during the five weeks.”

Pamida employees will keep their jobs at the converted stores, she said.

But not all Pamida stores will survive the merger.

“The vast majority of Pamidas will stay open and be converted,” Powers said. “I don’t have the final list, but less than 10 out of 193 will close.”

Most at risk are Pamidas that have a Shopko store nearby, she said.

Pamida stores in Two Harbors, Ely and Ashland appear safe, since no Shopko stores are in those communities. Store managers contacted Wednesday declined to comment.

All the Pamida stores converted will get Shopko’s new “Hometown” store format, a strategy to appeal to smaller communities by offering a broader range of merchandise, leading national brands and an improved store design for easy shopping. These tend to be smaller stores than those in larger markets like Duluth. Shopko already has tested the strategy. In the past two years, Shopko bought seven Pamida stores and successfully turned them into Shopkos with the Hometown format.

Currently, 10 of Shopko’s 149 stores have the format, none of which are in the Northland.

But Shopko Stores, Inc. doesn’t plan to stop there. It sees the merger as the foundation for even more growth, with plans to start building more stores in the second half of 2012, Powers said.

Those new locations still are being determined. But they’ll probably be in smaller communities, which is Shopko’s strategic focus.

“Competitors like Target and Walmart have the corner on the market in larger communities,” Powers explained. “We see the need in smaller communities that currently don’t have this.”

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