Macy's to close 100 stores
Move could include some
in Md. as chain boosts online investments
Macy's said Thursday that it plans to close about 100 stores next year and boost online investments as the nation's largest department store chain tries to become more nimble in an increasingly fierce retail market.
The closures represent nearly 15 percent of the stores under the Macy's brand. Officials did not say which locations would be affected.
The company lists seven Macy's stores in the Baltimore region on its website.
Several in Maryland, including stores at malls such as Marley Station and Security Square, are likely to be among those that close, said Mark Millman, president and CEO of Millman Search Group, a retail consulting and executive search firm. Other locations in the state might be at risk, he said.
The company, which operates the upscale Bloomingdale's stores as well, said it would increase its exclusive products and would prioritize investments in the stores that offer the highest growth potential.
Many of the stores targeted for closure are expected to be shut early next year, with others closing as leases or other agreements expire or are amended, the company said. Annual net sales at the stores Macy's plans to close were estimated at $1 billion.
Macy's President Jeff Gennette, who is to become CEO next year, said the locations to be closed have seen declining profit in recent years.
“We recognize that these locations do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations for the Macy's brand,” he said in a statement.
“We decided to close a larger number of stores proactively so we can invest in a winning customer experience in our most productive and highest-potential locations, as well as invest in growth sooner and more aggressively in digital and mobile.”
Macy's had been a strong performer since the recession, but the company has seen sales slow as it grapples with competition and changing shopping patterns.
People are spending more on home improvement, travel or spas. And when they do buy clothing, they are going to lower-cost options such as T.J. Maxx and fast-fashion chains like H&M. They are also increasingly buying online and gravitating toward Amazon.com, which is bolstering its private-label fashion brands. Amazon is, by some forecasts, expected to surpass Macy's as the largest online seller of clothing next year.
“As far as the department-store sector goes, it's a shrinking sector,” said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm headquartered in New York. “If you look at what's happening, it is inevitable that stores have to close and it's rational that a company like Macy's would want to reallocate resources to focus in the bigger-volume stores where they have much more potential.”
Macy's has already shrunk its Maryland footprint, closing stores in Hagerstown and Owings Mills as part of a 90-store downsizing over the past six years.
The next wave of closures will leave Macy's with 666 stores overall, including 38 Bloomingdale's locations — down nearly a quarter since its peak in January 2007.
Macy's employed 157,900 full-time and part-time workers at the end of January. A typical location has more than 100 people, Millman said.
The closures are likely to lead to the loss of thousands of jobs and create large vacancies at malls, which lead to less foot traffic and fewer sales for the remaining smaller stores.
“What you have is a cascading effect,” Millman said. While the move makes sense from Macy's perspective, “it's a death sentence for the mall and all the other retailers associated,” particularly at smaller shopping centers, he said.
Macy's reported Thursday that profits and sales fell in the second-quarter. However, the results beat Wall Street estimates, and shares rose $4.95, or more than 14?percent, to $38.95, in early trading.
Macy's said it earned $11 million, or 3?cents per share, in the quarter that ended July 30. That compares with $217 million, or 64 cents per share, in the year-ago period. Excluding charges related to store closings, the company earned 51 cents, which is above the 48 cents estimate from FactSet.
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