Messi It has not yet closed the approximately 150 stores it plans to close. But retail rivals are already smelling the opportunity.
In recent interviews with CNBC, Goal CEO Brian Cornell W Cole CEO Tom Kingsbury said the store's decision to downsize gives them an opportunity to increase their sales.
Chain off price TG Max It could attract more business, too, since it carries similar merchandise and has stores near Macy's locations that may be closing, according to Jefferies.
And many other retail names, including the Off-Price series rus And store competitors like Nordstrom They can benefit from lockdowns too. These companies already count many Macy's shoppers as their customers, according to an analysis of credit card data by Earnest Analytics.
Facing weak sales and pressure to improve its business, Macy's announced in late February that it would close more than a quarter of its roughly 500 namesake stores. With the wave of closures, the department store will join the list of retailers that have downsized and created a void for other brands to swoop into. Those stores include Bed Bath & Beyond, which closed all of its stores after filing for bankruptcy, or others like JC Penney, a department store that is a fraction of its former size.
Macy's closures could put up to $2 billion of market share up for grabs. The department store had net sales of $23.1 billion in its most recent fiscal year, and it said the 150 stores it is closing represent less than 10% of sales.
However, Macy's, for its part, said closing underperforming stores will help it focus on increasing sales in other locations. Macy's CEO Tony Spring said the company will open more locations of its luxury department store Bloomingdale's and cosmetics chain Bluemercury, which have outperformed the company's namesake chain. The closures will also free up capital to invest in its better-performing namesake stores.
Macy's has not yet said which locations it will close and exactly when, but it said 50 stores will close by early 2025. The move will have implications for malls as well, since Macy's will be closing giant stores that are malls.
Opportunity for off-price chains
Department stores have been losing market share for years as shoppers choose to shop at malls or online instead, said Corey Tarlow, a retail analyst at equity research firm Jefferies. Beneficiaries ranged widely from big box stores like Target to specialty players like Abercrombie & FitchWhich opened stores in major cities such as New York.
In an interview with CNBC in March, Target CEO Cornell said the retailer had benefited from other lockdowns before. For example, he said some of its stores are in former Toys R Us locations.
Off-price retailers, in particular, posed a major competitive threat to department stores — and were the biggest winners of their struggles, Tarlow said. They sell a lot of discretionary goods like clothing, handbags and shoes too, but often in more convenient locations and at a better price.
“It's actually like the new store, but much smaller,” he said. “They sell similar brands and similar products, but for 40% to 70% of the cost.”
Signs are placed at the entrance to the Macy's store that is scheduled to close at Bay Fair Mall on February 27, 2024 in San Leandro, California. Macy's announced plans to close 150 underperforming stores across the United States.
Justin Sullivan | Getty Images News | Getty Images
With the widespread closures carried out by Messi, Cos TJX.Owned by TJ Maxx, whose namesake stores include Marshalls and Home Goods, is particularly well positioned. About 63% of Macy's stores have a TJ Maxx or Marshalls within a one-mile radius, according to an analysis by Jefferies.
Off-price stores also attract a similar customer, which tends to be wealthier. About 47% of Macy's shoppers have an annual household income of more than $100,000, compared with about 50% of shoppers who go to TJX-owned stores, Jefferies found. Only about 30% of it Burlington Shoppers and about 34% of rus Customers have annual household incomes of more than $100,000, which could mean they have less overlap with Macy's shoppers.
“I used to see Toyota Camrys in the parking lots at TJ Maxx, and now I'll see BMWs, I'll see Mercedes, I'll see Porsches,” Tarlow said.
He added that TJX stores are easier for shoppers to access, with nearly 2,500 locations in the U.S., which is much larger than Macy's, which will have nearly 350 namesake stores after the closures.
Department store, big competitors see opportunity
Other competitors also have significant overlap with Macy's customer base, which could put them in a good position.
About a third of Macy's customers also shopped at Kohl's in the previous 12 months, according to an analysis of credit card data conducted by Earnest Analytics in late March. That was surpassed only by TJ Maxx, which had 37% of Macy's customers shopping its brands during the same period.
In a recent interview with CNBC, Kohl's CEO Kingsbury described the Macy's closures 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, but has high-quality locations.
“The beauty of Kohl's is the fact that our stores are located in strip malls,” he said in an interview at Shoptalk, a retail conference in Las Vegas, in March. “It's a really big deal. So we can bring the department store concept to the malls where you know a lot of successful businesses are generally located.”
However, Kohl's faces similar struggles to Macy's, struggling with discretionary spending and challenges attracting younger customers. Like Macy's, it also forecast that comparable sales, which strip out the impact of store openings and closings, may not grow or rise only modestly next year.
Macy's is also trying to take a page from its competitors' books. It is opening as many as 30 convenience stores in strip centers. At many of its department store locations, it has added Backstage, a discount store within the larger store.
But where Macy's leaves a void, Target may also be poised to open stores or gain customers. The Minneapolis-based company said last month that it plans to build more than 300 new stores over the next decade. It already has more than 1,950 stores across the United States
Speaking to CNBC, Cornell did not say whether the big box retailer would open more stores near the shuttered Macy's. But he added that it was being watched closely.
“We always look at the local market and opportunities and believe that there will continue to be changes in the retail sector for years to come,” he said. “With our capabilities and financial position, we can be one of the players that continues to be self-reliant, gain share and grow.”
