Macy’s moving away from malls with smaller, independent stores

Macy’s just put mall owners on notice.

Over the next two years the largest department store in the world will build new, smaller stores outside of malls, chief executive Jeff Gennette said on an earnings call.

“We continue to believe that the best malls in the country will thrive. However, we also know that Macy’s and Bloomingdale’s have high potential off-mall and in smaller formats,” Gennette said.

The company’s shares rose by 6 percent on Wednesday on the new strategy, as well as signs that shoppers are increasingly turning to the department store chain’s app and website to stock up on clothes, mattresses, bags and furniture.

Macy’s on Wednesday posted a smaller-than-expected second quarter loss of 81 cents per share on an adjusted basis — besting Wall Street’s expectations for a loss of $1.77 per share. A 53 percent surge in online sales, meanwhile, helped revenue rise to $3.6 billion, down 36 percent from a year ago but up from $3 billion in the first quarter.

Macy’s first disclosed its plans to test free-standing stores before the coronavirus and opened its first and only such store — dubbed Market by Macy’s — in Dallas in February. But the department store giant’s move away from malls appears to have been accelerated by the pandemic, with Gennette acknowledging that some customers just aren’t comfortable going to a mall during a pandemic.

“People are not using [the stores] to browse,” Gennette said during the call. “They are mission based, they are coming for a transaction. They are not lingering.” 

Gennette also said that Macy’s stores are increasingly being used to fulfill online purchases with about 30 percent of Macy’s digital transactions taking place at the stores instead of the warehouses. “I see that increasing,” the executive said.

The plan to open smaller stand-alone stores comes as Macy’s moves to close some 125 existing stores, representing a fifth of its total, over the next several years. 

“Macy’s has been over-sized for at least two decades both in terms of the number of its stores and their size,” said Craig Johnson, president of Customer Growth Partners. “Jeff has to do a major reset of the business and the off mall concept is a good idea even if it’s not a slam dunk, but just one of the pillars” of Macy’s new strategy.

Filed under