![Macy's shutdowns: How other retail competitors are smelling opportunity](https://image.cnbcfm.com/api/v1/image/107395071-17119934881711993486-33950850770-1080pnbcnews.jpg?v=1711993488&w=750&h=422&vtcrop=y)
Macy’s hasn’t yet shut the roughly 150 stores it plans to shut. But retail competitors already smell opportunity.
In recent interviews with CNBC, Goal CEO Brian Cornell and Kohl’s CEO Tom Kingsbury said the department store’s decision to shrink its footprint gives them a likelihood to extend their very own sales.
Off-price chain T.J. Maxx could pick up more business, too, because it carries similar merchandise and has stores near Macy’s locations which may shut, in response to Jefferies.
And lots of other retail names, including off-price chain Ross and department store rivals like Nordstrom could benefit from the closures, too. Those corporations already count lots of Macy’s shoppers as their customers, in response to an evaluation of bank card data by Earnest Analytics.
Facing lackluster sales and pressure to enhance its business, Macy’s announced in late February that it could close greater than 1 / 4 of its an roughly 500 namesake stores. With the wave of closures, the department store will join a listing of outlets which have shrunk in size and created a void for other brands to swoop in. Those include Bed Bath & Beyond, which closed all of its stores after filing for bankruptcy, or others like J.C. Penney, a department store that may be a fraction of its former size.
Macy’s closures could put as much as $2 billion of market share up for grabs. The department store’s net sales were $23.1 billion in essentially the most recent fiscal yr, and it said the 150 stores that it’s closing account for lower than 10% of sales.
Yet Macy’s, for its part, has said closing the underperforming stores will help it give attention to driving higher sales at other locations. Macy’s CEO Tony Spring said the corporate will open more locations of its higher-end department store Bloomingdale’s and wonder chain Bluemercury, which have each outperformed the corporate’s namesake chain. The closures may even unlock capital to speculate in its better-performing namesake stores.
Macy’s has not yet said which locations will close and when exactly they may shutter, but said 50 stores will close by early 2025. The move can have implications for shopping malls, too, since Macy’s will close giant stores which might be mall anchors.
A chance for off-price chains
Shops have been losing market share for years as shoppers have chosen to buy at strip malls or online as a substitute, said Corey Tarlowe, a retail analyst at equity research firm Jefferies. Beneficiaries have ranged widely from big-box stores like Goal to specialty players like Abercrombie & Fitch, which has opened stores in major cities like Recent York.
In an interview with CNBC in March, Goal CEO Cornell said the retailer has gotten a leg up from other closures before. For instance, he said, a few of its stores are in former Toys R Us locations.
Off-price retailers, specifically, have posed a significant competitive threat to shops — and been the massive winners from their struggles, Tarlowe said. They sell loads of discretionary merchandise like clothes, handbags and shoes, too, but often in additional convenient locations and for a greater price.
“It’s form of just like the recent department store in effect, however it’s much smaller,” he said. “They sell similar brands and similar products, but for 40% to 70% of the fee.”
Signs are posted at the doorway to a Macy’s store that is ready to shut at Bay Fair Mall on February 27, 2024 in San Leandro, California. Macy’s announced plans to shutter 150 underperforming stores across the USA.
Justin Sullivan | Getty Images News | Getty Images
With Macy’s broad closures, TJX Cos.-owned T.J. Maxx, which incorporates its namesake stores, Marshalls and Home Goods, is particularly well positioned. About 63% of Macy’s stores have a T.J. Maxx or Marshalls inside a one-mile radius, in response to an evaluation by Jefferies.
Off-price stores also draw an identical customer, which tends to be more affluent. About 47% of Macy’s shoppers have an annual household income of greater than $100,000, compared with about 50% of shoppers who go to TJX-owned stores, Jefferies found. Only about 30% of Burlington shoppers and about 34% of Ross customers have an annual household income of greater than $100,000, which can mean they’ve less overlap with Macy’s shoppers.
“I used to see Toyota Camrys in parking lots at a T.J. Maxx and now I see BMWs, I see Mercedes, I’ll see Porsches,” Tarlowe said.
He added that TJX stores are easier for shoppers to get to, with roughly 2,500 locations within the U.S. That could be a much larger footprint than Macy’s, which can have roughly 350 namesake stores after the closures.
Department store, big-box rivals see a gap
Other rivals even have a high overlap with Macy’s customer base, which could position them well.
A few third of Macy’s customers also shopped at Kohl’s through the prior 12 months, in response to a late March bank card data evaluation by Earnest Analytics. That was only surpassed by T.J. Maxx, which had 37% of Macy’s customers shop at its brands over the identical period.
In a recent interview with CNBC, Kohl’s CEO Kingsbury described Macy’s closures as a likelihood for the corporate to grow. He also said Kohl’s is the biggest department store within the country with 1,174 stores, but has quality locations.
“The fantastic thing about Kohl’s is the incontrovertible fact that our stores are situated in strip centers,” he said in an interview at Shoptalk, a retail conference in Las Vegas, in March. “It’s really a giant deal. So we are able to bring the department store concept to the strip centers where loads of the successful corporations are situated overall.”
Yet Kohl’s faces similar struggles as Macy’s, because it grapples with softer discretionary spending and challenges with attracting a younger customer. Like Macy’s, it also projected that comparable sales, which takes out the impact of stores openings and closures, may not grow or will only rise modestly within the yr ahead.
Macy’s has also been attempting to take a page from its competitors’ books. It’s opening as much as 30 smaller stores in strip centers. And at lots of its department store locations, it has added Backstage, an off-price shop inside the larger store.
But within the places where Macy’s is leaving a void, Goal can also be poised to open stores or gain customers. The Minneapolis-based company said last month that it plans to construct greater than 300 recent stores over the subsequent decade. It already has greater than 1,950 stores across the U.S.
Talking to CNBC, Cornell didn’t say if the big-box retailer will open more stores near shuttered Macy’s. But, he added, it’s watching closely.
“We’re all the time taking a look at the local market, the opportunities and we expect there’s still going to be displacement inside retail for years to return,” he said. “And with our capability and financial position, we might be one among the players that continues to lean in and take share and growth.”