Macy’s may have outperformed Wall Street expectations for the holiday season, but the department store will be closing as many as 28 Macy’s stores and one Bloomingdale’s store, a company spokesperson confirmed to The Wall Street Journal. The retailer operates approximately 680 department stores and 190 specialty stores, including its Backstage and Bluemercury locations.
The department store giant said comparable store sales fell 0.6% from a year ago for its owned plus licensed merchandise in November and December 2019. For Q4, which includes the holiday season, Wall Street analysts had been calling for a 1.75% decline in same-store sales.
The company’s stock actually jumped 6.5% in premarket trading on Jan. 8. The holiday performance represents a significant improvement over the company’s Q3 results, when comparable sales declined by 3.9%, which is likely why investors were happy with the news. However, after the market opened and word of the store closures spread, Macy’s pared those gains. The stock was up 0.06% as of 11 am. Macy’s had the second-worst performing stock in the S&P 500 last year, with shares falling 43%.
On a Q3 earnings call in November, Macy’s management acknowledged that rapidly deteriorating sales trends at lower-tier malls contributed to the weak results and cut the annual profit outlook in response. Macy’s has tried to keep many of these stores open despite falling sales and profitability to serve as convenient hubs for online order pickup and returns.
In December, Macy’s President Hal Lawton left the company to become the CEO of Tractor Supply Co. Lawton, a former eBay executive, had spearheaded many of the recent changes at Macy’s and was highly regarded by industry executives.
Macy’s said it will hold a meeting with investors on Feb. 5 in New York, where it will release a three-year strategy.
The store closures at Macy’s are yet another symptom of the overall decline of department stores. To close out 2019, Moody’s Investors Service estimated that department stores’ operating profits dropped 20% throughout the year — a number that was adjusted downward twice (first from a 10% decline, then from a 15% decline). During the holiday season, Macy’s and its department store counterparts continued to rely on steep discounts to bring people into their stores, which in turn put pressure on profit margins.
Off-price retailers, discounters and even mass merchants don’t have these problems to the extent that department stores do: Target, TJX and Ross Stores all saw sales increases. The Moody’s report indicates that the off-price sector turns inventory roughly twice as fast as department store chains.