A sign is posted at the entrance of a Macy’s store at Bay Fair Mall in San Leandro, California, which will close on February 27, 2024. Macy’s announced plans to close 150 underperforming stores across the United States.
Justin Sullivan | Getty Images News | Getty Images
macy’s department store It has not yet closed about 150 stores it planned to close. But retail rivals have sensed an opportunity.
In a recent interview with CNBC, Target CEO Brian Cornell and Kohl’s Chief Executive Tom Kingsbury said the department store’s decision to reduce its footprint gave them an opportunity to increase their sales.
discount chain store TJ Max Jefferies said the company may also get more business because it sells similar merchandise and stores near Macy’s may close.
and many other retail brands, including discount chains Ross and department store competitors such as Nordstrom May also benefit from closure. The companies already count many of Macy’s shoppers as their customers, according to an analysis of credit card data by Earnest Analytics.
Facing sluggish sales and pressure to improve business, Macy’s announced in late February that it would close More than a quarter of its approximately 500 eponymous stores are like this. As the closures roll in, the department store will join the ranks of retailers that are shrinking, creating space for other brands to come in. These include Bed Bath & Beyond, which closed all its stores after filing for bankruptcy, or others like JC Penney, a department store that is a fraction of its former size.
Macy’s closing could leave as much as $2 billion in market share up for grabs. The department store had net sales of $23.1 billion in its most recent fiscal year and said the 150 stores it closed accounted for less than 10% of sales.
However, Macy’s said that closing underperforming stores will help it focus on driving higher sales in other stores. Macy’s Chief Executive Tony Spring said the company will open more stores of high-end department store Bloomingdale’s and beauty chain Bluemercury, both of which are outperforming the company’s namesake chain. The closures will also free up funds to invest in better-performing stores of the same name.
Macy’s has not disclosed which stores will close or when, but it said 50 stores will close by early 2025. The move will also have an impact on malls, as Macy’s will close large stores that are the backbone of malls.
Opportunities for low-price chain stores
Corey Tarlowe, a retail analyst at equity research firm Jefferies, said department stores have been losing market share for years as shoppers choose to shop in malls or online.Beneficiaries range from big box stores like Target to specialty businesses like Abercrombie & Fitchthe company has opened flagship stores in major cities such as New York.
Target CEO Brian Cornell told CNBC in March that the retailer had gained advantages from other previous closures. For example, he said, some of its stores are in former Toys R Us locations.
Discount retailers, in particular, pose a significant competitive threat to department stores and emerge as big winners in the department store fight, Tarlow said. They also sell many non-essential items such as clothes, handbags, and shoes, but usually in more convenient locations and at better prices.
“It’s actually kind of like a new department store, but much smaller,” he said. “They sell similar brands and similar products, but at 40% to 70% of the cost.”
With Macy’s fully closed, TJX CorporationTJ Maxx, which owns TJ Maxx, which includes its namesake stores Marshalls and Home Goods, is in a particularly good position. About 63% of Macy’s stores have a TJ Maxx or Marshalls within a one-mile radius, according to an analysis by Jefferies.
Discount stores also attract similar customers, who tend to be more affluent. Jefferies found that about 47% of Macy’s shoppers have annual household incomes over $100,000, compared with about 50% of shoppers who go to TJX-owned stores. Only about 30% burlington shoppers and about 34% Ross Customers have annual household incomes above $100,000, which likely means they have less overlap with Macy’s shoppers.
“I used to see Toyota Camrys in TJ Maxx in the parking lot, now I see BMWs, I see Mercedes, I’ll see Porsches,” Tallow said.
He added that TJX stores will be more accessible to shoppers, with about 2,500 stores in the U.S., which is a much larger footprint than Macy’s, which will have about 350 after closing Store of the same name.
Department store, big-box rivals see opportunity
Other competitors also have a high degree of overlap with Macy’s customer base, which could put them in a favorable position.
About one-third of Macy’s customers also shopped at Kohl’s in the past 12 months, according to an analysis of credit card data by Earnest Analytics at the end of March. Second only to TJ Maxx, 37% of Macy’s customers shopped at the brand during the same period.
In a recent interview with CNBC, Kohl’s CEO Tom Kingsbury described Macy’s closing as an opportunity for the company to grow. He also said Kohl’s is the largest department store in the country, with 1,174 stores, and is strategically located.
“The great thing about Kohl’s is that our stores are in the middle of the strip,” he said in an interview at Shoptalk, a retail conference in Las Vegas in March. “It’s really a big deal. So we can bring the department store concept to the strip center, where you know a lot of successful companies are located.”
However, Kohl’s faces similar struggles as Macy’s, as it faces weakness in discretionary spending and the challenge of attracting younger customers. Like Macy’s, the company predicts that comparable sales, excluding the impact of store openings and closures, may not increase or increase only slightly in the coming year.
Macy’s has also been trying to take a page from its competitors’ book.it is Open up to 30 small stores in strip centers. In many department stores, it has also added Backstage, a discount store located within a larger store.
But where Macy’s leaves a void, Target may also be ready to open stores or win customers. The Minneapolis-based company said last month it plans to open more than 300 new stores over the next decade.It already has more than 1,950 stores in the United States
In an interview with CNBC, Cornell did not say whether the big box retailer would open more stores near the closed Macy’s. But, he added, it was watching closely.
“We’re always looking at local markets and opportunities, and we think there will still be changes in retail over the next few years,” he said. “With our capabilities and financial position, we can be a player that continues to move forward, gain share and grow one.”
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