Home / Business / Macy’s, Struggling to Draw Shoppers, Plans to Close 100 Stores – New York Times
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Macy’s, Struggling to Draw Shoppers, Plans to Close 100 Stores – New York Times

People continue to spend. In the spring, household spending rose at an annualized rate of 4.2 percent, driving overall economic growth. But more and more, they now want bargains and convenience — in stores and online — and know how to find them.

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Credit Andrew Sondern/The New York Times

“Given the convenience of e-commerce, the consumer needs a really good reason to go to a store and park their car,” said Edward Yruma, a managing director at KeyBanc Capital Markets. “It has to be exciting and have something new, because if not, why wouldn’t I sit on my couch in my pajamas and shop on my iPad?”

For retailers, that new reality is playing out in a variety of ways. Some, like Sports Authority, have thrown up their hands and closed. Others, like Express, have started opening outlet stores in regular malls.

T. J. Maxx, Marshalls and outlet stores have boomed by loudly advertising big savings over their full-priced department store rivals, spurring some to create their own versions. Nordstrom long ago created Nordstrom Rack, for example, while Macy’s recently introduced Macy’s Backstage. But in many cases, heavy discounts and lower-priced offshoots have eroded the power of traditional stars to lure in shoppers.

The situations at Macy’s and Walmart, and their reactions this week, capture the large forces at play, and the sense that major changes need to be made to thrive.

Walmart is already a discount behemoth, with 4,627 stores in the United States, but it has not been able to duplicate its dominance online. It isn’t for lack of trying. The company has dedicated its deep pockets to the effort, building a large engineering outpost in Silicon Valley, the heart of the tech industry.

But like other discount retailers, it has been unable to convert its vast network of warehouses and stores into a seamless and highly profitable online enterprise. In some ways, the ease of its online shopping site also lags those of some tech competitors. While Walmart is the second largest online retailer, it is far behind Amazon, which has an efficient network of distribution centers and a robust, standard-setting site.

“Something drastic had to be done,” said Bernard Sosnick, a retail analyst at Madison Global Partners.

That something was buying Jet.com, an unprofitable, year-old start-up, for about $ 3 billion, the biggest e-commerce acquisition ever in the United States. Jet offers Walmart an edge in the online bulk-buying space. It also gives it Marc Lore, a founder of Jet who is widely considered a top e-commerce executive. Another company he helped start, Quidsi.com, was sold to Amazon for more than $ 500 million.

“None of these traditional brick-and-mortar retailers feel like they can move fast enough to stave off the competition,” said Liz Dunn, chief executive of Talmage Advisors, a retail consulting firm.

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Macy’s flagship store in Herald Square in Manhattan. Credit Spencer Platt/Getty Images

As companies like Sears and J. C. Penney experienced long and fast declines, Macy’s had often been held up as one of the few retailers that had managed to withstand the new environment. But it, too, now feels pressure on multiple fronts.

It faces major competition from online sites like Amazon, which is beginning to make inroads in apparel. The biggest threat, though, comes from discount chains like T. J. Maxx, some of which have little online presence.

The challenges have put heavy shareholder pressure on the company. Shares in the stock have fallen more than 40 percent in the last 12 months. In June, the company announced that Jeffrey Gennette, its president and a longtime Macy’s executive, would replace Terry J. Lundgren as chief executive next year.

As the share price has fallen, investors have pressured Macy’s to sell some of its real estate. Macy’s closed 41 stores in its last fiscal year, and said on Thursday that it was in talks to sell its men’s store on San Francisco’s Union Square.

The company said that the 100 stores it planned to sell generate about $ 1 billion in annual sales, but that some of the stores’ real estate was more valuable than their retail sales. Macy’s said it would spend savings on its digital businesses and to revamp other locations.

The store closings were announced along with quarterly earnings, in which Macy’s reported that profits fell to $ 11 million last quarter, down from $ 217 million in the same period last year. Sales fell 3.9 percent, to $ 5.87 billion.

Investors were clearly upbeat about the overall message, though. The stock rose more than 17 percent on Thursday.

Macy’s currently operates 728 stores, including 675 full-line locations. It did not specify which stores would close. And it said it did not know how many employees would be laid off, but said that it would offer severance to full- and part-time workers.

For much of Macy’s history, large department stores were used as “anchors” at the mall, and benefited from cheap rent in exchange for drawing people in. But as their luster faded, a divide has emerged between the best- and worst-performing shopping centers, leaving a trail of “dead malls” behind.

“For Macy’s, they still believe in stores. They’re just acknowledging that a lot of the business has shifted online and away from some lower-quality malls,” Ms. Dunn said.

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