Malls are dying.
That’s a popular idea that many retailers have used to justify closing stores, but it does not actually reflect reality. Mall traffic has actually been strong.
“Summer is underway, and malls are still bustling. In July 2024, visits to indoor malls and open-air shopping centers were up 2.5% and 2.4%, respectively, compared to the equivalent period of 2023. Though these year-over-year (YoY) increases were more moderate than the significant jumps observed in May and June, they underscore the segment’s continued solid positioning,” according to data from Placer.ai.
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Some malls, of course, have been stronger than others. “A” malls have been the most resilient with lesser malls seeing anchor stores close and traffic fall in a meaningful way.
It’s not correct to say that malls are struggling. Instead, malls have become more a game of “have” and “have not.” The successful malls have arguably become even more successful while the struggling ones run the risk of closing.
That has forced retailers to make some very tough choices. A number of big names have been selectively closing locations. One retailer — a mall anchor store — has been very aggressive in closing locations for what it says is a good reason.
Macy’s has been shrinking its store footprint.
Image source: Shutterstock
Macy’s aggressively making changes
Macy’s (M) has been trying to be ahead of the curve in making changes to its stores. That has included changing up its product mix.
“At Macy’s, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands. And, we invested in newness and proven areas of product strength while reducing our exposure to areas of softer demand,” CEO Tony Spring said during the retailer’s second-quarter earnings call,
Spring noted that Macy’s saw some challenging customer behavior in the later part of the quarter.
“As the quarter progressed, our customer became more discriminating, which we attribute to ongoing macroeconomic uncertainty and an increasingly complex news cycle. As trends diverge from our expectations, we did not stand still. We took proactive steps to drive profitable sales, protect our gross margins, and further control SG&A. As a result, while second-quarter sales of $4.9 billion were slightly below our outlook, adjusted EPS of $0.53 was well above,” he added.
The retail giant tried to aggressively manage its products to meet customer demand.
“At Macy’s, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion. We enhanced our promotions and delivered more targeted personalized messages across categories and brands. And we invested in newness and proven areas of product strength while reducing our exposure to areas of softer demand,” the CEO shared.
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Macy’s closing 150 more stores
In addition to managing its merchandise and promotions, Macy’s plans to exit markets where it does not believe it can operate profitably.
The chain has split its stores into “go forward” and “non-go forward” stores. The company continues to invest in new merchandise for its go-forward locations.
“With two consecutive quarters of meaningful comp outperformance, we are pleased to announce that we are implementing women’s shoe and handbag staffing tests and roughly 100 additional go-forward locations this fall. These tests will provide valuable insights that will be used as we further refine our initiatives,” Spring said.
The chain’s 150 non-go forward locations will be closed, but only when the company can sell the locations in a favorable deal.
“As a reminder, in fiscal 2023, comp sales of Macy’s go-forward locations outperformed non-go-forward locations by approximately 500 basis points and the four-wall adjusted EBITDA rate outperformed by roughly 950 basis points. While non-go-forward locations are underperformers relative to the total Macy’s fleet, they are valuable real estate assets. Demand for these properties has been strong,” according to the CEO.
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While all 150 will ultimately be sold and closed, the pace for that will be slow.
“We are pleased with the pace and the quality of deal-making and now expect to close approximately 55 stores this year versus prior expectations of roughly 50,” he added.
Macy’s has not shared a specific timetable for closing the rest of its non-go forward locations.
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