Thursday, August 11, 2016

MACY'S TO CLOSE STORES -- AND OMNICHANNEL

Macy's does click and collect for omnichannel. As they close stores, what happens to how they service e-commerce?


Macy’s to Close About 15% of Stores, Cut Jobs

Shares, down more than 40% in the past 12 months, rise as struggling retailer pares its business




The Empire State building sits in the background of a Macy’s department store in New York in 2013. ENLARGE
The Empire State building sits in the background of a Macy’s department store in New York in 2013. Photo: Associated Press
Macy’s Inc. M 17.09 % said it would close 100 additional stores, representing about 15% of its store base and roughly 4% of its annual revenue, in the retailer’s latest move to contend with falling foot traffic and sliding sales.

The company’s stock has tumbled during the past year as results have disappointed investors. Macy’s shares gained 17% to $39.97 Thursday in New York trading, but the stock is still down 42% over the past 12 months.
Despite posting a sharp drop in quarterly profit and another period of declining sales, Macy’s helped lift retailers across the spectrum Thursday morning. Shares in fellow department store Nordstrom Inc. JWN 7.53 % rose 7.33%, while J.C. Penney Co. JCP 8.63 % stock gained 8.25% and Target Corp. TGT 1.31 % shares rose 1.3%.
The move to shutter more stores comes in addition to the 40 closures Macy’s announced earlier this year.
“We operate in a fast-changing world,” said Chief Executive Terry Lundgren, and “this involves doing things differently and making tough decisions.”

Macy’s executives said they haven’t finalized which 100 stores they will close, and they will continue to operate most of them through the end of the fiscal year. “Most of these stores are underperformers or in weak locations,” but some were sitting on real estate that was worth more than their retail sales, the company’s finance chief, Karen Hoguet, told analysts Thursday.
The company said it reached the number of closures by analyzing the performance of each store and the strategic importance of the location to the company’s foot print. It also looked at demographics such as changes in population and income, and noted that in some good markets it has stores in underperforming malls.
“By closing weaker stores and monetizing some of our real estate where the redevelopment opportunities are significant, we will grow faster and we will produce higher return on invested capital,” Ms. Hoguet said.


It is unknown how many employees may lose their jobs because the company hasn’t finalized which stores it will close, a Macy’s spokesman said.
While sales declined in the June quarter, Macy’s executives said they saw improvement from the first quarter of the year. The company said the number of transactions declined 5% in the second quarter from a year earlier, but average-unit retail sales rose 2.8%.
Sales on international credit cards fell 12% in the second quarter, but that was an improvement from the first quarter when they fell 20%.
Mr. Lundgren said in May, after Macy’s reported its worst quarterly sales result since the recession, that he wasn’t counting on consumers to spend more.
Americans have been spending—the Commerce Department said late last month that personal consumption climbed 4.2% in the second quarter, the best rate since late 2014—but what they buy and where they buy it is changing.
Shoppers increasingly are opting to make purchases online, especially at Amazon.com, AMZN 0.35 % leaving traditional retailers scrambling as foot traffic drops and consumers shell out less on things like clothing and more on services.
During the quarter, sales at Macy’s stores open at least a year fell 2%, an improvement from the steep 5.6% decline in the first quarter and less severe than the 4.7% fall analysts expected. Still, it marked the sixth straight quarterly decline.
Jeff Gennette, Macy’s president and the designated successor to Mr. Lundgren, said the store closures will shrink sales in the near term.
“In the short term, our company’s top-line sales will be somewhat smaller, but the changes being made will position us to grow comparable sales more quickly and generate a level of profitability that stands out among retailers,” he said.
Annual net sales of the stores flagged for closure are about $1 billion, Mr. Gennette said.
Overall for the latest quarter, Macy’s reported a profit of $11 million, or 3 cents a share, down from $217 million, or 65 cents a share, a year earlier. Excluding impairments stemming from store closures, among other items, per-share profit fell to 54 cents from 94 cents.
Along with a 3.9% decline in revenue, to $5.87 billion, promotional pricing bit into earnings. For example, the company held its first “Black Friday in July” event, which Mr. Lundgren said brought in customers and boosted online sales, though at the expense of the bottom line.
Analysts predicted 45 cents in adjusted earnings per share and $5.75 billion in revenue, according to Thomson Reuters.
Macy’s backed its view for the year, still forecasting a 3% to 4% slide in same-store sales. The company expects to report $3.15 to $3.40 an adjusted share, bracketing the $3.26 average analyst estimate.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com