Macy's (M) Plans Store Closures, Including One Bloomingdale's Location

The news is starting to come in about the holiday shopping season, and though we're hearing about plenty of records, the earnings news isn't what you'd call good all over. Word out of JCPenney NYSE: JCP and Kohl's NYSE: KSS say that same-store shopping sales were on the decline over this time last year, and that's a path that's only sustainable if the ultimate destination is disaster. Word also emerged from Macy's NYSE: M that says 28 stores are about to be closed, including one outlet of Bloomingdale's.

All Part of the Plan at Macy's?

On the surface, the reports of store closures looked comparatively mild, like part of everyday operations. In fact, it took some pains to note that these closings are simply the result of an annual review, and that the 28 stores to be closed were discovered as part of an annual review.

The stores in question are being shuttered for perhaps the most innocuous of reasons; they're the lowest performers right now, and Macy's wants to consolidate its position and focus efforts on more profitable stores. It's all perfectly reasonable, perfectly rational.

The store closures are focused primarily on the eastern half of the US, with just six outliers on the West Coast. Helena, Montana will be losing its Macy's, as will Antioch, California and four locations in Washington State.

The rest run the gamut, including four stores to be shuttered in Florida—Miami, Pompano Beach, Sanford, and Vero Beach—two in Georgia, and a smattering of locations spanning as far east as Leominster, Massachusetts and as far west as Prairie Village, Kansas. Most of the closures appear to be in lower-tier cities like West Dundee and Carbondale, with no Chicago, Des Moines, or Denver-tier outlets are on the block. The Bloomingdale's location to close is as yet unclear.

This actually is in keeping with previous moves seen by Macy's; back in 2016, it announced it would be closing 100 stores in the next few years. In January 2017, it acted on that move, shuttering 68 stores, and then following it up with just short of 12 in 2018. 2019 saw single-digit store closures, and now, with 28 stores slated to close, Macy's is set to close more than originally planned, but not much more. Further updates on real estate are expected out February 5, when Macy's has an investor meeting planned.

Or Maybe It's the Right Idea Too Late

Macy's is doing what amounts to the right thing. It's shuttering less-than-productive business in order to better focus finite resources on higher performers to help keep them higher performers, and also putting more of a focus on their online operations, as well as the Backstage operations, which are an off-price retail operation. Macy's still has around 680 stores up and running, under its various banners.

Yet some numbers persist that look like smoke; Macy's same-store sales for the recently-concluded 2019 holiday shopping season slipped 0.6%, and that was enough to spark optimism on Wall Street as consensus expected a 1.75% drop. Regardless of the actual number, it's still a drop.

Macy's is actually on a path to execute a similar pattern to Target NYSE: TGT, which has been the darling of the retail sector for the last few months now. Macy's looks to be taking advantage of its geographic dispersal and putting more weight into its online venues, potentially even planning to shrink some locations down. Such a move would be almost identical to Target's strategy, and Target has made great strides with a move to get customers on the website and fulfill orders in stores.

The problem here, however, is that Target has already done this, while Macy's is still working on it. Every day that Macy's takes pushing to get the plan in place is another day Target can cement its position as the go-to non-Amazon option. There's certainly something to be said for Macy's deliberate approach; 28 stores closing in one year does sound a lot better than 100.

So while Macy's is rejoicing that its same-store sales were only down a fraction of a percent this year rather than the nearly 2% expected, Target, Walmart NYSE: WMT and the like are continuing to consolidate their positions. If it's planning a similar approach, then Macy's is going to need to push a bit harder, get the plan in place, and start competing on the strength of better-quality goods or the like lest it slip into irrelevance for good.