Macy's on Tuesday said that 45 more stores will permanently close, most early this year, as part of a plan announced a year ago to close 125 over three years. The department store will likely finish sooner, considering that, with 29 shut down last year, it's more than halfway done.
As of the third quarter 2020, the company ran 544 Macy's stores, 54 Bloomingdale's stores and 166 Bluemercury stores. A list of the locations and banners to close will be released later on Wednesday, according to a Macy's spokesperson; several Chicago news outlets on Tuesday reported that the Water Tower Place store on Michigan Avenue is among them.
"As previously announced, Macy's, Inc. is committed to rightsizing our store fleet by concentrating our existing retail locations in desirable and well-trafficked A and B malls," the spokesperson said by email. "To that end, we announced several store closures today that align to the guidance we provided in February 2020. These closures bring us closer to achieving the right mix of mall-based stores."
As indicated in Macy's statement, these closures represent a further blow to lower-end malls, which have steadily lost anchors as more department stores shrink their footprints or even disappear.
The closure of an anchor has wider implications, as it often triggers clauses in inline tenant, (or non-anchor), mall leases that allow for an easy exit or an unscheduled renegotiation of rent. The pandemic has influenced this, but has only concentrated into a couple of years what would have played out anyway in five to 10, according to research from Green Street last year.
Indeed, Macy's closure plans were set forth as part of its "Polaris" strategy, announced before the pandemic. Other aspects of the turnaround may be restarting as well, considering that Macy's just announced a new chief merchant on Monday.
The closure of its Chicago flagship suggests that the strategy goes beyond lesser malls and could have a geographic component as well. That would square with the advice of analysts like Nick Egelanian, president of retail development firm SiteWorks, who believes the retailer will end up closing hundreds more locations, or should. The foray into off-price, like the plans to shift to strip malls, has served as "a giant distraction," when Macy's should focus on aspects of the business like merchandising instead, according to Egelanian.
"They haven't sold the right strategy to Wall Street," Egelanian said by phone. "They need to figure out how to operate profitably on the coasts, and they need to reinvent the company."