Macy's Inc. (NYSE:M)’s is to close 45 store outlets after suffering its biggest same-store sale in the recent quarter. The retail outlet has already notified affected staff of the impending closure which is part of a bigger plan that will result in the shutting down of 125 stores.
Store Closures
Early last year, Macy’s announced plans to close down some stores as it shifts its focus to e-commerce. The COVID-19 pandemic accelerating a shift in consumers' shopping patterns appears to be the fuel that will accelerate the closing down of the stores set to be completed by 2023.
In defense of the proposed shutdowns, the company’s spokesperson maintains that Macy’s is only seeking to right-size its store fleet with the closures. Likewise, the end game is to concentrate operations in desirable and well-trafficked malls. The closures are also expected to bring the retailer close to the right mix of mall-based stores.
Digital Sales Focus
While Chief Executive Officer, Jeff Gennette, has already reiterated commitments to betting on the best mall spaces. The long-term plan is to focus on growth malls. A shift from malls comes on the heels of Macy’s reporting a 20% decline in same-store sales in the November quarter. In contrast, digital sales grew 27%.
While digital sales in the recent quarter were not sufficient to offset sales decline in stores, they are still seen as a potential driver of the bottom line given their growth rate. Consumers are increasingly shunning brick-and-mortar stores opting to do the shopping and carry out purchases online.
Likewise, traffic to brick and mortar stores is down by 33% year over year in one of the busiest holiday shopping season. With traffic not expected to bounce back to pre-corona levels given the rate at which e-commerce is growing Macy’s decision to cut store footprint remains well thought.
By cutting store footprint, Macy’s is essentially trying to stay afloat amid a tumultuous retail environment. More than a dozen retail outlets have already filed for bankruptcy competition affirming the systematic changes taking place in the segment.
