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Shifting to online, Macy's to close 100 more stores

Macy's announced it is closing 100 more stores by early 2017, as the department store giant shifts its attention and resources to an e-commerce and digital strategy.

Macy's announced it is closing 100 more stores by early 2017, as the department store giant shifts its attention and resources to an e-commerce and digital strategy.

The closures follow the 38 Macy's closing from this past spring, including the 90,000-square-foot store at the Suburban Square shopping center in Ardmore.

Macy's has not said which stores will be closed, or precisely when. But analysts predict it will be at the end of the year in time for the holidays, and for year-end store-closing clearance sales.

In closing 15 percent of its 728 locations in the United States, analysts said, Macy's appears to be acknowledging the reality of the rapidly shifting shopping habits of consumers in a digital age.

"They've been closing the past few years mainly due to the profit margins and the shift toward online sales outperforming brick-and-mortar stores," said Madeline Hurley, an analyst who covers retail at IBISWorld, an industry research firm based in New York. "It's an attempt to keep margins afloat and also utilize their portfolio of real estate that they have, because some of their stores are much more valuable as real estate assets than actual Macy's store locations."

Like other department stores that were traditional mall anchors, including Sears and JCPenney, Macy's hasn't been able to stem the tide toward online shopping. A move to develop a value-oriented version of itself did not pan out.

"They tried to open an off-price retail store - Macy's Backstage - that really has not helped them much," Hurley said. "It was their own version of Nordstrom Rack."

Despite shedding 15 percent of its physical store footprint, Macy's said it still plans to be in 49 of the top 50 U.S. retail markets, which include Philadelphia.

Macy's accounts for a 12.6 percent share of the $167.8 billion department store industry - one that is being squeezed as consumers move to online shopping.

Hurley said there are estimates that the department store industry will decline at an annualized 1.6 percent over the next five years.

Many Macy's stores sit on prime property and may be more valuable as real estate - a situation that some believe is driving the closures.

Hurley said Macy's has talked about downsizing its store footprint in San Francisco and Manhattan for the last few years. Moves such as leasing one floor in a multilevel Macy's to another retailer have been on the table.

Sears has gone this direction. In several malls along the East Coast, including King of Prussia and Willow Grove Park, former Sears spaces are now occupied by fast-fashion retailer Primark of Ireland.

Jeff Green is president and CEO of Jeff Green & Partners, a retail consultancy based in Phoenix. He also works extensively with retailers in shopping centers on their long-term real estate strategies.

"Certainly, the department store industry has been hit quite hard by online retail," Green said. "As a result, there are not only too many department stores, but the footprint for existing department stores is too large."

Unlike the Gap - which is also shedding hundreds of stores due to online pressures - Macy's owns most of its stores and the land they are on.

"So the stores they close can ultimately be sold at probably a good multiple, given these stores have been around for a while," Green said. "Hats off to Macy's. This is a gutsy thing to announce. They are being very proactive about maximizing their store portfolio, and asking, 'What is the right size for their chain?' "

Macy's stock went up right after the company made Thursday's announcement. It rose $5.81, or 17.1 percent, to $39.81 on the news, and also better-than-expected earnings.

"Wall Street has definitely looked upon this action as aggressive and being good," Green said.

Macy's has 10 stores in the Philadelphia area.

sparmley@phillynews.com

215-854-4184 @SuzParmley