With Its Stock Sliding, Macy’s Opens More Small-Format Stores
Key Takeaways
- Macy’s will open up to 30 more smaller stores
- These locations are about one-fifth the size of a typical, shopping mall Macy’s
- Macy’s stock has been in decline since 2015
Macy’s said earlier this week that it plans to add up to 30 new small format locations through the fall of 2025, bringing the total number of these stores to about 42 (and the total number of Macy’s stores to over 500). Those expansion plans will start in the fall.
Macy’s smaller stores range in size from 30,000 to 50,000 square feet, or about one-fifth the size of its traditional shopping mall stores. Are these petite shopping spaces the answer to Macy’s financial decline? We’ll dig into what experts think below.
Macy’s shopping mall struggle
Why would a store that’s struggling open more locations?
The key is that these locations are smaller and in more accessible locations for American shoppers. The new stores are located primarily in strip malls and outdoor malls. So, you’ll still find Macy’s in shopping centers, but the company is shifting away from the big indoor malls that were a social and commercial staple of American life in the 1980s and 1990s and have since declined in popularity. Macy’s is certainly not the only retailer to experiment with new strategies in this changing landscape.
These new stores “helped us optimize our physical store footprint, bringing the company closer to existing and desired customers, while encouraging more frequent visits,” said Macy’s Chief Stores Officer Marc Mastronardi. In Q2 this year, Macy’s small-format stores had positive comp growth with “limited to no cannibalization in the existing markets,” Mastronardi said.
Despite a bullish outlook from within Macy’s, industry experts see the Macy’s pivot as a big change to the company’s DNA — one that’s not easy to pull off. “Macy’s has a store footprint that was built for the past,” said GlobalData Managing Director Neil Saunders, “and it is still trying to modernize it.”
What does Wall Street think?
In addition to the bigger uphill battle Macy’s is fighting as a shopping mall relic, the current economic moment is hitting the retailer hard. This year, middle-income Americans — Macy’s primary demographic — have struggled with credit card debt and high interest. As a result, the company cut its full-year forecast over the summer, expecting those weaker sales to persist.
Looking at the metrics, Macy’s small-format stores open for more than one fiscal year have posted comparable sales growth on an owned-plus-licensed basis from the beginning of the fiscal year. “Comparable sales,” a retail industry metric, aims to control for the impact of store openings, closures, and renovations to allow for a more accurate comparison.
Many investors remain skeptical. Big picture: Shares of the company have largely been on a downward trend since 2015. This year alone, Macy’s stock is down about 44% while the S&P 500 has risen about 12% in that same timeframe.
The bottom line
Macy’s is trying a little bit of everything to succeed, but so far, investors aren’t persuaded. The year overall hasn’t been impressive, and shares were 0.5% lower on Tuesday. The world has moved on from legacy retailers, and if Macy’s is to survive, it will be as a very different version of its former self.
