Macy’s hasn’t closed 150 stores yet. But Target, Kohl’s CEOs already smell opportunity

Macy’s
hasn’t
yet
shut
the
approximately
150
stores
it
plans
to
close.
But
retail
competitors
already
smell
opportunity.

In
recent
interviews
with
CNBC,


Target
CEO
Brian
Cornell
and


Kohl’s
CEO
Tom
Kingsbury
said
the
department
store’s
decision
to
shrink
its
footprint
gives
them
a
chance
to
increase
their
own
sales.

Off-price
chain


T.J.
Maxx
could
pick
up
more
business,
too,
since
it
carries
similar
merchandise
and
has
stores
near
Macy’s
locations
that
might
shut,
according
to
Jefferies.

And
many
other
retail
names,
including
off-price
chain


Ross
and
department
store
rivals
like


Nordstrom
could
benefit
from
the
closures,
too.
Those
companies
already
count
many
of
Macy’s
shoppers
as
their
customers,
according
to
an
analysis
of
credit
card
data
by
Earnest
Analytics.

Facing
lackluster
sales
and
pressure
to
improve
its
business,
Macy’s

announced
in
late
February
that
it
would
close

more
than
a
quarter
of
its
an
approximately
500
namesake
stores.
With
the
wave
of
closures,
the
department
store
will
join
a
list
of
retailers
that
have
shrunk
in
size
and
created
a
void
for
other
brands
to
swoop
in.
Those
include
Bed
Bath
&
Beyond,
which
closed
all
of
its
stores
after
filing
for
bankruptcy,
or
others
like
J.C.
Penney,
a
department
store
that
is
a
fraction
of
its
former
size.

Macy’s
closures
could
put
as
much
as
$2
billion
of
market
share
up
for
grabs.
The
department
store’s
net
sales
were
$23.1
billion
in
the
most
recent
fiscal
year,
and
it
said
the
150
stores
that
it’s
closing
account
for
less
than
10%
of
sales.

Yet
Macy’s,
for
its
part,
has
said
closing
the
underperforming
stores
will
help
it
focus
on
driving
higher
sales
at
other
locations.
Macy’s
CEO
Tony
Spring
said
the
company

will
open
more
locations
of
its
higher-end
department
store
Bloomingdale’s
and
beauty
chain
Bluemercury,
which
have
both
outperformed
the
company’s
namesake
chain.
The
closures
will
also
free
up
capital
to
invest
in
its
better-performing
namesake
stores.

Macy’s
has
not
yet
said
which
locations
will
close
and
when
exactly
they
will
shutter,
but
said
50
stores
will
close
by
early
2025.
The
move
will
have
implications
for
shopping
malls,
too,
since
Macy’s
will
close
giant
stores
that
are
mall
anchors.

Department
stores
have
been
losing
market
share
for
years
as
shoppers
have
chosen
to
shop
at
strip
malls
or
online
instead,
said
Corey
Tarlowe,
a
retail
analyst
at
equity
research
firm
Jefferies.
Beneficiaries
have
ranged
widely
from
big-box
stores
like
Target
to
specialty
players
like


Abercrombie
&
Fitch,
which
has
opened
stores
in
major
cities
like
New
York.

In
an
interview
with
CNBC
in
March,
Target
CEO
Cornell
said
the
retailer
has
gotten
a
leg
up
from
other
closures
before.
For
example,
he
said,
some
of
its
stores
are
in
former
Toys
R
Us
locations.

Off-price
retailers,
in
particular,
have
posed
a
major
competitive
threat
to
department
stores
—
and
been
the
big
winners
from
their
struggles,
Tarlowe
said.
They
sell
a
lot
of
discretionary
merchandise
like
clothes,
handbags
and
shoes,
too,
but
often
in
more
convenient
locations
and
for
a
better
price.

“It’s
kind
of
like
the
new
department
store
in
effect,
but
it’s
much
smaller,”
he
said. “They
sell
similar
brands
and
similar
products,
but
for
40%
to
70%
of
the
cost.”

With
Macy’s
broad
closures,


TJX
Cos.-owned
T.J.
Maxx,
which
includes
its
namesake
stores,
Marshalls
and
Home
Goods,
is
especially
well
positioned.
About
63%
of
Macy’s
stores
have
a
T.J.
Maxx
or
Marshalls
within
a
one-mile
radius,
according
to
an
analysis
by
Jefferies.

Off-price
stores
also
draw
a
similar
customer,
which
tends
to
be
more
affluent.
About
47%
of
Macy’s
shoppers
have
an
annual
household
income
of
more
than
$100,000,
compared
with
about
50%
of
shoppers
who
go
to
TJX-owned
stores,
Jefferies
found.
Only
about
30%
of


Burlington
shoppers
and
about
34%
of


Ross
customers
have
an
annual
household
income
of
more
than
$100,000,
which
may
mean
they
have
less
overlap
with
Macy’s
shoppers.

“I
used
to
see
Toyota
Camrys
in
parking
lots
at
a
T.J.
Maxx
and
now
I
see
BMWs,
I
see
Mercedes,
I’ll
see
Porsches,”
Tarlowe
said.

He
added
that
TJX
stores
are
easier
for
shoppers
to
get
to,
with
roughly
2,500
locations
in
the
U.S.
That
is
a
much
larger
footprint
than
Macy’s,
which
will
have
approximately
350
namesake
stores
after
the
closures.

Other
rivals
also
have
a
high
overlap
with
Macy’s
customer
base,
which
could
position
them
well.

About
a
third
of
Macy’s
customers
also
shopped
at
Kohl’s during
the
prior
12
months, according
to a
late
March credit
card
data analysis
by Earnest
Analytics.
That
was
only
surpassed
by
T.J.
Maxx,
which
had
37%
of
Macy’s
customers
shop
at
its
brands
over
the
same
period.

In
a
recent
interview
with
CNBC,
Kohl’s
CEO
Kingsbury
described
Macy’s
closures
as
a
chance
for
the
company
to
grow.
He
also
said
Kohl’s
is
the
largest
department
store
in
the
country
with
1,174
stores,
but
has
quality
locations.

“The
beauty
of
Kohl’s
is
the
fact
that
our
stores
are
located
in
strip
centers,”
he
said
in
an
interview
at
Shoptalk,
a
retail
conference
in
Las
Vegas,
in
March. “It’s
really
a
big
deal.
So
we
can
bring
the
department
store
concept
to
the
strip
centers
where
you
know
a
lot
of
the
successful
companies
are
located
overall.”

Yet
Kohl’s
faces
similar
struggles
as
Macy’s,
as
it
grapples
with
softer
discretionary
spending
and
challenges
with
attracting
a
younger
customer.
Like
Macy’s,
it
also
projected
that
comparable
sales,
which
takes
out
the
impact
of
stores
openings
and
closures,
may
not
grow
or
will
only
rise
modestly
in
the
year
ahead.

Macy’s
has
also
been
trying
to
take
a
page
from
its
competitors’
books.
It’s

opening
up
to
30
smaller
stores
in
strip
centers.
And
at
many
of
its
department
store
locations,
it
has
added
Backstage,
an
off-price
shop
inside
of
the
bigger
store.

But
in
the
places
where
Macy’s
is
leaving
a
void,
Target
may
also
be
poised
to
open
stores
or
gain
customers.
The
Minneapolis-based
company
said
last
month
that
it
plans
to
build
more
than
300
new
stores
over
the
next
decade.
It
already
has
more
than
1,950
stores
across
the
U.S.

Speaking
to
CNBC,
Cornell
did
not
say
if
the
big-box
retailer
will
open
more
stores
near
shuttered
Macy’s.
But,
he
added,
it’s
watching
closely.

“We’re
always
looking
at
the
local
market,
the
opportunities
and
we
think
there’s
still
going
to
be
displacement
within
retail
for
years
to
come,”
he
said. “And
with
our
capability
and
financial
position,
we
can
be
one
of
the
players
that
continues
to
lean
in
and
take
share
and
growth.”