Hadley Malcolm, USA TODAY , WKYC
Macy’s (M) will close approximately 100 stores next year as the department store continues to pare back its business in the face of changing shopping patterns and more online competition.
The company announced a series of strategic changes Thursday aimed at setting up the retailer for more sustained growth in the future. The plan includes bringing in more brand shops within the stores, improving online search and ordering, and hosting in-store events to drive traffic.
The 100 closures, about 15% of Macy’s 675 full-line locations, are only the latest round of closures Macy’s has done in recent years to cast off stores where profitability has waned. Macy’s hasn’t announced which locations will close, but said they represent about $1 billion in annual sales, excluding sales the company expects to retain online or at nearby stores. That’s nearly 4% of Macy’s total annual sales in 2015.
Macy’s has been undergoing significant transformations lately to try to become more valuable to shoppers who have hundreds of other options to choose from, online or off. Now, the company is rethinking the role physical stores play in an environment where fewer people see the need to shop in them, said Macy’s President Jeff Gennette.
“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,” he said in a statement. Gennette is set to take the CEO post from Terry Lundgren in early 2017.
The closures are generally seen as a good idea by analysts who follow the company, because they’ll allow Macy’s to focus more on digital investments and improving the better-performing stores.
“We are encouraged by the fact that Macy’s sees this move as part of a wider program to reinvent itself and will direct the savings from shuttered stores into its remaining locations,” Neil Saunders, CEO of retail research firm Conlumino, wrote in a note Thursday.
Macy’s also announced second quarter results Thursday — sales fell 3.9% to about $5.9 billion, beating analyst expectations for sales of $5.8 billion, according to S&P Global Market Intelligence. Sales at stores open at least a year fell 2%. The company also beat earnings estimates for 48 cents a share — excluding certain one-time costs, it earned 54 cents a share. Investors seemed pleased with the financial performance and plans to become a leaner business. Shares surged 14% in morning trading.
Trends that have plagued the company in recent quarters seemed to level off, as summer travel led to a smaller decline in tourist spending and weather patterns became more normal, driving up sales in apparel. Transactions fell 5% in the quarter and tourist credit card sales were down 12%, but the company noted that was better than a 20% drop in the first quarter.
Macy’s also continues to look for opportunities to unlock value from its real estate portfolio, particularly at flagship locations in cities, a move it’s faced pressure to do for the past year. It’s in talks to sell its men’s store in San Francisco, which would likely result in the store closing.