Department store giant Macy’s said Thursday it plans to close 100 stores, a dramatic step that is aimed at helping the chain get ahead of a potentially crippling problem: America, executives say, has too many stores for the online shopping era.
Macy’s has been steadily pruning its portfolio, often moving to close several dozen underperforming stores right after the annual holiday rush. But in dropping a summertime announcement that it will close 15 percent of its locations, the chain appears to be moving more aggressively than many of its retail industry counterparts to adapt to a fast-changing shopping environment.
Macy’s has plenty of reasons to scramble: Many of its stores are located in small, regional malls, the kind whose foot traffic has been especially hard-hit by the rise of e-commerce. And the department store category has generally struggled as shoppers increasingly turn to off-price retailers such as T.J. Maxx and fast-fashion players such as H&M to buy their clothes.
These factors, along with a pullback in spending by international tourists and unseasonable weather, have left Macy’s in a rut that has stretched for more than a year. On Thursday, the company said it saw a 2.6 percent drop in comparable sales in the most recent quarter, a weak performance that was nonetheless an improvement over the dismal 6.1 percent year-over-year decline it recorded in the previous quarter. The retailer’s revenue was $5.87 billion, down 3.9 percent from the same period last year.
Macy’s said the store closures would probably cost it about $1 billion in annual sales. And at one time, such a large batch of store closures might have been viewed as a retailer’s concession of defeat. But in this instance, the company’s stock soared 17 percent on Thursday, a sign that investors view the move as a proactive measure portending a stronger future for Macy’s.
In some ways, it should not come as a surprise that Macy’s is slashing stores. It has some 675 full-line stores, or 728 if you include outlets such as Macy’s Home stores. Terry Lundgren, the retailer’s longtime chief executive, has been saying for a while now that the chain simply had too many stores.
SOURCE: Sarah Halzack
The Washington Post