FINANCE

Macy’s details store closings, restructuring amid poor holiday sales

BY Marianne Wilson

Macy’s gave more information about its previously announced store closing plans as it unveiled a series of actions to streamline its store portfolio, intensify cost efficiency efforts and execute its real estate strategy.

The actions, which involve eliminating layers of management and a headcount reduction of approximately 6,200, came as the retailer posted a 2.1% drop in same-store sales for November and December, which was at the low end of its previous guidance. Macy’s said its apparel business, fine jewelry, furniture and bedding performed well, but ongoing weakness in handbags and watches negatively impacted its results.

“We believe that our performance during the holiday season reflects the broader challenges facing much of the retail industry,” said Macy’s chairman and CEO Terry Lundgren. “We are pleased with the performance of our digital business, with double-digit gains at both macys.com and bloomingdales.com; however, store sales continued to be impacted by changing customer behavior.

Macy’s said it expects its streamlining initiatives to generate annual expense savings of approximately $550 million, beginning in 2017, enabling the company to invest an additional $250 million in growing the digital business, store-related growth strategies, Bluemercury, Macy’s Backstage and China. These savings, combined with savings from initiatives implemented in early 2016, exceed the $500 million goal communicated in fall of 2015, one year earlier than expected.

STORE CLOSINGS

Macy’s said it will close 68 stores (out of a current total of 730 Macy’s stores), with three closed mid-year, 63 to be closed in early spring 2017 and two be closed in mid-2017. Three other locations were sold, or are to be sold, and are being leased back. The store closures are part of the approximately 100 closings Macy’s announced in August 2016. (For a list of the store closings, click here.)

The retailer said it intends to opportunistically close approximately 30 additional stores over the next few years as leases or operating covenants expire or sale transactions are completed.

As a result of closing 63 Macy’s stores in early 2017, along with the three closed mid-year 2016, the company’s 2017 sales are expected to be negatively impacted by approximately $575 million. Macy’s said this reflects the company’s ability to retain sales at nearby stores and on macys.com through targeted marketing and merchandising efforts.

“As we’ve noted, it is essential that we maintain a healthy portfolio of the right stores in the right places,” said Lundgren. “Our plan to close approximately 100 stores over the next few years is an important part of our strategy to help us right-size our physical footprint as we expand our digital reach. We are closing locations that are unproductive or are no longer robust shopping destinations due to changes in the local retail shopping landscape, as well as monetizing locations with highly valued real estate.”

Macy’s added that four new Macy’s and Bloomingdale’s stores are currently planned and/or under construction, as previously announced.

In addition, new Macy’s and Bloomingdale’s stores are planned to open in Abu Dhabi, and one Bloomingdale’s store is planned to open in Kuwait, all under license agreements with Al Tayer Group. The retailer also plans to continue its expansion of Macy’s Backstage (within Macy’s stores) and Bluemercury (freestanding and within Macy’s stores).

RESTRUCTURING

Macy’s announced a “significant “restructuring of its operations to focus resources on strategic priorities, improve organizational agility and reduce expenses. The company is restructuring its central organization with a focus on eliminating layers of management to reduce costs while improving decision making and agility. In addition, it is intensifying efforts to reduce non-payroll costs companywide, making changes to the way stores are operated and reducing field infrastructure to reflect “reduced store sales and evolving customer behavior.”

Together, these actions will result in a headcount reduction of approximately 6,200.

REAL ESTATE

Since the end of the third quarter, Macy’s has completed two real estate transactions that, in total, resulted in the receipt of approximately $95 million of cash proceeds and gain recognition of approximately $56 million. The transactions involve its Stonestown Galleria store in San Francisco, which it sold to General Growth Properties and plans to lease back, along with the sale of its downtown store in Portland, Oregon.

In addition, Macy’s is closing its downtown Minneapolis location in March. The retailer is selling the store for more than $40 million to the 601W Companies, the StarTribune reported.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
C-SUITE

The 25 people shaping retail’s future are…

BY Marianne Wilson

A 12-year-old CEO is among the 25 individuals named to the National Retail Foundation’s 2017 List of People Shaping Retail’s Future.

Mikaila Ulmer, founder and CEO of Me & The Bees Lemonade, is the youngest of the list’s honorees, all of whom will be recognized at the NRF Foundation Gala on January 15 during the NRF Big Show in New York City.

“Retail is driven by millions of talented and passionate individuals who are constantly changing the industry, and The List 2017 captures the very best of people making an impact,” NRF Foundation executive director Ellen Davis said. “Each in their own way, this year’s honorees are shaping retail’s future and emulate the very best of what retail represents.”

In addition to celebrating all the individuals on The List at the Gala, NRF will also recognize Mark Parker, chairman, president and CEO of Nike, as “The Visionary,” a new honor for an inspiring leader with a long record of spearheading change in the industry.

Here is NRF’s 2017 List of People Shaping Retail’s Future:

Disruptors:

Brad Bogolea – Co-Founder and CEO, Simbe Robotics

Anthony Bruce – Co-Founder and CEO, Applied Predictive Technologies

Christine Hunsicker – Founder and CEO, Gwynnie Bee

Dominik Richter – Founder & CEO, HelloFresh Global

Tristan Walker – Founder and CEO, Walker and Company Brands

Dreamers:

Stefanie Botelho – Founder and CEO, Fitzroy Toys

Chieh Huang – Co-founder and CEO, Boxed Wholesale

Michelle Lam – Co-founder and CEO, True&Co.

Kavita Shukla – Inventor and founder, FreshPaper

Mikaila Ulmer – Founder and CEO, Me & the Bees Lemonade

Givers:

James Brett – President, West Elm

Emily Avedikian – Founder and director, Keeps Boutique at The Gatehouse

Roslyn S. Jaffe – Co-founder, secretary & director emeritus, Ascena Retail Group

Drew Ann Long – Inventor, Caroline’s Cart

Monika Wiela – CEO and founder, Give Back Box

Power Players:

Scott Dahnke – Global Co-CEO, L Catterton

Kevin Hofmann – President, online and chief marketing officer, The Home Depot

Steven Lowy – Co-CEO, Westfield Corporation

Toni M. Miller – Senior executive, VP, chief administration officer and CFO, Boscov’s Department Store

Marisa Thalberg – chief marketing officer, Taco Bell Corp.

Influencers:

Lisa Clyde – Global head of consumer & retail investment banking, Bank of America Merrill Lynch

Jason Goldberg – SVP, content & commerce, SapientRazorfish

David Lawenda – VP, global marketing dolutions – US, Facebook

Wendy Liebmann – Founder, CEO and chief shopper, WSL Strategic Retail

Phil Wahba – Senior writer, Fortune

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
News

Finding a New Outlet

BY Al Urbanski

In 2014, August Partners published a study that compared the national visit share of various retail formats with their percentage of gross leasable area. A fascinating dichotomy emerged. On the one end of the bar graph were malls, accounting for 18% of GLA, but only 14% of traffic. On the other were outlets with just 1% of GLA, but 9% of shoppers. It’s an invalid comparison to make because there are some 1,200 malls in the United States and just over 200 outlet centers. But if malls held the shopper attraction power that outlets did, they’d claim 162% of consumer traffic!

That, perhaps, explains why outlet retailing is in the midst of an expansion phase. Some 44 new outlet centers are in the planning stages for openings over the next three years in the U.S. and Canada, according to CBRE. Even if 10 of those projects don’t get built, that’s a pace of close to one new outlet center a month. Contrast that to the fact that few new malls have been topped off in the past seven years and it spells boom times for outlets.

“When you’ve got about 215 outlet centers spread around the U.S. and 12 new ones open, that’s significant growth,” said David Hinkle of The Outlet Resource Group, who spent most of his 17 years in retail opening National Book Warehouses in most of those centers. “It’s the only form of brick-and-mortar retail keeping pace with e-commerce.”

Outlet centers are becoming a go-to option for more consumers in more places than ever before, especially millennials. According to CBRE’s retail assets director Mark Hunter, millennials spend an average of $100 per outlet visit and they make an average of three visits a month. TORG research found that outlets claim 26% of annual apparel spend to 46% for all other brick-and-mortar retail.

New England Development only got into the outlet business in 2014 when it bought the Palm Beach Mall, tore it down, and put outlets and a power center in its place. Since then, the company has co-developed a new outlet center with Simon in Maryland, opened one in Little Rock and is busy building new centers in Des Moines and Detroit.

“There are a lot of smaller metros with affluent communities that punch above their weight and deserve outlet centers,” said Michael Barelli, a VP at the company. “There are nearly a million people in the Des Moines metro area, there are high disposable incomes there, and the nearest outlet center was 80 miles away. Now we’re making outlets an everyday option for shoppers there.”

City-dwelling millennials are pumping new blood and cash into outlet centers, and longtime players in the outlet business are beckoning to them. As the exclusive retail sponsor of last summer’s Demi Lovato-Nick Jonas “Future Now” tour, Simon Premium Outlets negotiated tour stops near its centers and staged meet-and-greets with the pop stars at places like Leesburg, Va., and Edinburgh, Ind.

Millennial oases such as Shake Shack and Le Pain Quotidien are making their debuts at Simon properties, and has adopted social media as a prime marketing channel.

“Our outlets are outside of the metro areas, so it can be a little hard to get them into the car,” said Stephen Yalof, CEO of Simon Premium Outlets. “We came up with ways to communicate with them that are cutting-edge.”

A study conducted earlier this year by Macerich found that more than half of the tourists visiting its Fashion Outlets of Chicago fell into the 18-to-36 age group. The trend has attracted a new breed of retailer.

“A great example is Vineyard Vines, a decidedly younger-skewing brand that just opened this fall at Fashion Outlets of Chicago,” said Macerich senior VP Jamie Bourbeau. “Luxury retailers know they can build brand loyalty and create lifelong affinity with millennials.”

Outlets are gateways to a new consumer base for luxury retailers, maintains Hinkle: “Some of these brands are on Fifth Avenue and Rodeo Drive, and younger shoppers will go into them for the first time at outlet centers because their mind-sets are different there.”

Outlets, which have long thrived in tourist towns or off interstates between two large cities, are creeping closer to those high-street locales. Howard Hughes Corp. brought the good times rolling back to the New Orleans’ Riverwalk by converting it to an outlet center. Wilmorite is doing a mall-to-outlet conversion in Rochester, N.Y., and Macerich is expanding its urban outlets business with two new Fashion Outlets under construction in Philadelphia and San Francisco.

Macerich’s citified centers will occupy sizeable footprints. Fashion Outlets of Philadelphia — a co-development with PREIT — will hunker down in Center City with a 730,000-sq.-ft. presence.

“This is steps away from the convention center and other top-drawing tourist attractions like Reading Terminal Market and Independence Hall,” Bourbeau said. “It’s also set right above a major transit hub with great traffic among suburban bus and train commuters.”

Wilmorite hopes to draw shoppers from a 60-mile radius to its Marketplace Outlets — formerly the Marketplace Mall — with a square footage in excess of 1 million. More retailers will be needed to fill spaces like that, too, and indeed, new brands are being attracted to value retail.

“You’re going to see more and more full-price retailers that don’t have outlet divisions decide to start them, and that’s going to be a trend for the foreseeable future,” Hunter said.

“Outlet shoppers are mission-focused on great finds and wonderful deals,” Bourbeau said. “We have names like Gucci, Prada and Karl Lagerfeld co-existing beautifully with segment leaders like Nordstrom Rack.”

Outlet retail emerged from the Great Recession stronger than any other shopping center format, Hinkle believes, because people emerged from it watching their money more closely, but still enamored of high-end brands.

“In many markets around the country,” he posited, “the outlet store is better suited for the marketplace than the full-price store.”

Department store closings, meanwhile, widen the void that outlets can fill.

“The department stores had so much control over the distribution channel and didn’t want that competition in their trade areas,” Hunter said. “But now, the whole dynamic of the distribution channel has changed.”

And so has the evolving retail landscape, where one new outlet center is rising every month.

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...