Even after the holiday shopping rush, retail giant Macy’s is facing some hard choices. Profits were up for the holidays season a slight 1.1% compared to 2016. This was not enough to save many local stores. They recently announced further plans to downsize the massive network of stores to tighten up the budget and get back to being profitable.
The retailer announced plans in 2016 to start to cut back on locations as mall-based leases expired. The idea was to not renew many places and cut employee roles significantly. At the end of 2016, they announced this meant closing 68 stores and letting 10,000 employees go.
Those numbers took a turn for the worse with 5,000 more employees being let go. The retailer also made a shocking announcement that named seven stores that they had not previously listed for closure. The following stores are now slated to be closed:
Miami (Downtown), Miami
The Oaks, Gainesville, Fla.
Novato (Furniture), Novato, Calif.
Honey Creek Mall, Terre Haute, Ind.
Birchwood Mall, Fort Gratiot Township, Mich.
Fountain Place, Cincinnati
Burlington Town Center, Burlington, Vt.
These seven stores were previously slated to remain active, the addition of these stores came as a shock to many workers. Holiday sales were up slightly from last year but still did not keep pace with many of the other stores in malls across the country. J.C. Penney posted an increase in sales that sat right at 3.4% for the year. Overall sales for the Macy’s chain fell 2.4-2.7%. This includes the slight improvement during the holiday season.
Several factors have played havoc in business for the once-booming retail chain. Many point to the success of online shopping as the end of most brick and mortar stores. For decades the local mall was almost home away from home for many families, but this has changed as shoppers start to use online giants like Amazon to buy on demand.
It seems the desire to have to trudge out in lousy weather to Christmas shop is losing its allure for most Americans. It is far more comfortable to sit in front of the computer at work or home to shop. Many stores like Walmart have joined the online shopping craze with free shipping and store pickup options as well.
Beyond the battle to stay one step ahead of Amazon, the retailer also fought with other issues within their business model. Stores like Walmart focused on low-cost goods, and for the most part, Macy’s could not keep up. They had reoccurring issues with margin compression.
Margin compression can sink their business. This plainly “…occurs when the costs to make a product or deliver a service rise faster than the sales price of the product or service. Hence, putting pressure on profit margins.”
Issues with margin were further complicated by an ongoing problem with stock management and “non-store function.” Each of the issues could have been overcome on their own, but it seems that the problems combined created a real crisis. This means the once profitable Macy’s is sinking in many towns and cities across America. One has to wonder if this will also be the end of the average mall since this is just one of the anchor stores keeping many malls relevant.
The newly listed stores join four others already slated to close within the next month. Those stores include:
Laguna Hills Mall, Laguna Hills, Calif.
Westside Pavilion, Los Angeles
Stonestown Galleria, San Francisco
Magic Valley Mall, Twin Falls, Idaho
For the stores that were already listed as being closed, bargain shoppers are preparing for their liquidation sales. Macy’s confirmed that sales might start as soon as January 8, 2018. They anticipate the stores to be fully closed within eight weeks of the sale starting.
Macy’s continues to tighten the ranks among stores not making a profit, with the total closed stores since 2015 hitting the 124 mark. According to Macy’s CEO Jeff Gennette:
“Looking ahead to 2018, we are focused on continuous improvement and will take the necessary steps to move faster, execute more effectively and allocate resources to invest in growth.”
The executive team at Macy’s is hopeful that can recover from this set back to be even stronger in the market. They are not only battling big names like Amazon but also brick and mortar bargain stores like TJ Maxx that drive down their sales. Combining this with their internal issues, it seems that something needs to change to keep them in business.