Macy’s plans to shut 100 stores as earnings fall; its stock soars 17%
Macy’s is planning to close about 100 stores — nearly 15% of its locations — next year due to pressure as consumers increasingly shop online.
Macy’s Inc. said Thursday that it will close about 100 of its stores next year — about 15% — as the struggling retailer grapples with rapid changes in people’s buying habits.
The Cincinnati-based company said the locations of the closed stores would be announced at a later date. It would not say whether the closures would include any of its 127 stores in California.
Most of the closures will occur early next year and involve an unspecified number of job cuts, Macy’s said.
Macy’s currently operates 675 full-line stores nationwide; including locations such as Macy’s Home stores, it has 728. The ones that will be shut down are full-line stores, and they generate roughly $1 billion in annual sales, or 4% of Macy’s total sales.
“Nearly all of the stores to be closed are cash flow positive today, but their volume and profitability in most cases have been declining steadily in recent years,” Macy’s President Jeff Gennette said in a statement.
Macy’s said shutting the stores would enable it to bolster its online presence and “elevate our total customer experience across all methods of shopping.”
The move follows the chain’s decision to shut 40 stores earlier this year. Macy’s said the upcoming store closings would not affect its Bloomingdale’s division.
Also on Thursday, Macy’s announced a sharp drop in its second-quarter profit on a 4% drop in sales.
Macy’s said its same-store sales last quarter — that is, sales at stores open at least one year, which is a key gauge of retailing — fell 2% from the same quarter last year.
Macy’s and other major apparel-heavy retailers such as Kohl’s Corp. and Nordstrom Inc. are under intense pressure because foot traffic at shopping malls is dropping as people increasingly shop online and spend less on apparel.
“I felt like we were going to reach a tipping point that would force a vicious, fundamental reset in the physical retail world and that’s what we’re seeing,” said Richard Church, managing director for retail at the research firm Discern Group Inc.
Noting the drop in mall traffic, the shift to online buying and declining apparel spending, Church said “all of these forces are converging to accelerate this process.”
In addition, malls that lose a Macy’s might find it tough to replace the store as an anchor tenant, and that could hurt sales for other retailers in such malls, Church said.
In its second quarter, which ended July 30, Macy’s said its profit plunged to $11 million, or 3 cents a share. That’s down from $217 million, or 64 cents a share, in the year-earlier quarter.
Excluding the impact of earlier store closings and other items, Macy’s per-share earnings were 54 cents, down from 94 cents in the same quarter a year earlier.
But Macy’s stock surged in response to its store-closure announcement. The stock jumped 17.1% to close at $39.81.
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UPDATES:
2:05 p.m.: This article has been updated with the stock’s closing price.
11:05 a.m.: This article has been updated with comments from analyst Richard Church and with a more recent stock price.
8:35 a.m.: This article has been updated throughout with staff reporting.
This article was originally published at 6:20 a.m.
