Macy’s has reportedly put 29 locations on the department store chopping block with plans to close them this quarter.
The Associated Press reported the retailer’s decision to continue shrinking its physical presence following the holiday season. Representatives for Macy’s did not respond to requests for comment.
“I think we saw it coming; Macy’s has been in downsizing mode,” said Steve Jellinek, vice president of Morningstar. “It’s one of the balancing acts that department stores have to deal with. They have to understand consumers and that they have choices, and they have to understand the market where the stores are located.”
One of the Macy’s closures is at the Muncie Mall, located at 3501 North Granville Avenue in Muncie, Indiana, where Macy’s is the only anchor tenant. The mall is owned by Washington Prime Group, which listed the struggling property as a non-core asset in its third quarter earnings. Macy’s owns its space, and other parts of the mall back a $33.2 million commercial mortgage-backed securities (CMBS) loan, according to Jellinek.
Another upcoming closure, of a Macy’s at The Falls, located at 9100 Southwest 136th Street in Miami, also has $70 million in associated CMBS debt, Jellinek said.
He added that Macy’s appears to understand the issues and is rightsizing by closing the 29 underperforming stores, including one Bloomingdale’s location.
“They’re focusing on the best malls in each region. A lot of the 2020 closures are in smaller markets,” he said. “Most of the cities with the closing stores are in areas with 150,000 residents or less.”
Earlier this week, Macy’s reported strong online sales, but store sales dropped 0.6 percent in November and December. Two months ago, the company lowered profit projections after a 3.5 percent drop in same-store sales in the third quarter of 2019.
For years, Macy’s has been closing stores and unloading properties, as major department store retailers like Sears and JCPenney struggle to maintain a brick-and-mortar presence and adjust to modern consumer habits. Coresight Research recently reported that the U.S. surpassed 9,300 store closures before the end of 2019, compared to 5,844 closures for full-year 2018.
Jellinek said he expected some bad news after the holidays ended. But he said the fears of a “retail apocalypse” are overblown. He explained the reports of closures don’t tell the story that, for every store closure, there are five store openings. In August, the National Retail Federation reported that just 16 retailers were responsible for 73 percent of store closures up to that point in 2019.
Macy’s currently operates about 680 department stores under the nameplates Macy’s and Bloomingdale’s, and about 190 specialty stores. The company is set to give an update on its growth plans at a meeting with investors on Feb. 5.