Macy's to close 150 stores - CRE effects

Bisnow.com: Macy's released a statement that they will be closing 150 stores nationwide over the next 3 years.

My immediate reaction was "there are 150 Macy's stores in the US?!

Indeed - as of Jan, 2024, there were 507 stores in the US. To close 150 is a pretty bold move, and one would imagine that is just the stores where leases are expiring. 

It also poses a significant question on large retail shopping centers. I'm the last to be considered a shopping expert, but all the Macy's stores I'm aware of are THE or one of the flagships of every mall/ shopping center they are in. That's certainly the case locally in Seattle and Bellevue. Whose big enough in the retail world to fill these spaces? What can the landlord do to somehow utilize all this lost space. I imagine it will take a tremendous amount for alterations to get these spaces functional again. 

Below are the key points and my comments. 

Macy's will close 150 stores nationwide over the next three years as part of a plan meant to right the ship for the storied retailer, which has struggled in recent years, particularly since the pandemic.

The first 50 stores are scheduled to close by the end of the fiscal year, Macy's said, with the rest of the closures occurring by the end of 2026. The statement also mentioned the monetization of $600M to $750M of assets by the end of 2026, indicating the potential sale of properties.

The impacted stores account for 25% of the company's square footage but just 10% of sales.

When the closures are complete, Macy's will be left with about 350 stores, just over half its pre-pandemic store count. The company announced a similar in February 2020, closing 125 stores in the three years that followed.

Weitz- franky, this feels like it may be a slow play to avoid BK and allow time for shareholders to get out/ retain value before closing shop for good. Perhaps that's just the skeptic in me. 

The company also announced a pivot toward its luxury brands, Bloomingdale’s and Bluemercury. The renewed focus on these brands is expected to result in 15 new Bloomingdale's locations and 30 Bluemercury stores in the next three years. Another 30 existing Bluemercury stores are slated for remodeling. 

The move comes amid slumping sales for the legacy department store chain, as well as a looming proxy fight for Macy's with Arkhouse Management, which nominated a slate of nine directors for Macy's 14-person board not long after the retailer rejected a bid by Arkhouse and Brigade Capital Management to go private.

The real prize in taking the company private would likely be its real estate. Macy's is worth billions more than the $5.8B Arkhouse and its partner put forward, mainly because of its prime real estate.

Last year, Macy's net sales dropped 5.5% compared to 2022, and  2comparable store sales were down 6% year-over-year. The chain experienced a loss of $71M in 2023, down from a net income of $105M in022. For the fourth quarter of 2023, net sales were off 1.7% compared with a year earlier, and comparable store sales dropped 4.2%.

Macy's faces the same headwinds as the entire department store sector, which has been slowly contracting for years. In January, department stores suffered a 6.7% drop in sales compared to a year earlier according to the Census Bureau. 

Weitz- I have a feeling this won't be the last story like this. We will follow what we think will be a wild ride in the coming years as best we can for our readers with no political agenda.  

For more information on Snohomish County Commercial Real Estate investing, consider contacting a Snohomish County Commercial Real Estate broker.

My contact: 

Scott@WeitzCommercial.com 
D: 206.306.4034