“We now believe we are set up well to proceed to a comeback”, said Macy’s Chairman and CEO Terry Lundgren in a statement.
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Macy’s is under pressure from activist investor Starboard Value LP to unlock value in its properties and on Thursday said it would keep trying to monetize real estate at its flagship and mall-based locations, including the iconic Herald Square store in NY.
The move is part of a company effort to operate fewer stores while focusing resources on better-performing locations.
“This country is overstored given evolving customer shopping habits”, Macy’s Chief Financial Officer Karen Hoguet said during a call with analysts discussing the company’s second-quarter financial results. “We are now in the process of analyzing the situation of each store so we can make these important decisions as intelligently as possible”, said Andrea Schwartz in an email to USA TODAY NETWORK-Wisconsin on Thursday morning. Revenue at stores open at least a year, including licensed businesses like beauty, were down 2 percent in the second quarter. In the second quarter of 2015, operating income was $436 million. But Macy’s has already said it will be closing its Laurel Plaza store in North Hollywood, Calif., late this fall and its West Valley City, Utah, emporium. Shares of competitors Nordstrom increased 5.4 percent while those of J.C. Penney Company gained 4.5 percent and stocks of Target Corporation climbed 2.7 percent.
The decision to exit 100 department stores comes at a time when shopping malls are seeing more consumers shift many of their purchases to online sites rather than spend time at bricks-and-mortar outposts.
Total sales fell almost 4 percent to $5.87 billion in the second quarter after falling 7.4 percent in the first quarter. That’s the sixth straight decline for that measure.
The location of the stores that will be closing has not been released, saying the announcement will be made to the employees of the affected stores before a public announcement. Even so, it expects to lose about $1 billion in annual revenue from the 100 planned store closures. 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. The average estimate of eight analysts surveyed by Zacks Investment Research was for earnings of 40 cents per share.
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Now what: Finally, Macy’s reiterated its previous guidance for the full-year 2016.
