Macy’s Inc (NYSE:M) continues to find itself suffering this year, with another round of Macy’s stores closing recently in California. Two locations in Los Angeles and one in San Francisco are being shuttered while the company grapples with what many are calling the “retail apocalypse” that has struck department stores across the country, causing a massive amount of retail stores closing in 2017.
The most recent Macy’s stores shutdown come after a year that has seen the company close dozens of locations and eliminated thousands of jobs in order to help save costs as more and more consumers are turning away from brick-and-mortar shopping and instead taking their dollars online. The Macy’s stores closing in 2018 will begin with these three California locations, which will remain open during the holiday season before shuttering early next year.
Recent studies have showed that for the first time ever, the majority of shoppers will be conducting their business online instead of at big-box retailers like Macy’s. Furthermore, Amazon.com, Inc. (NASDAQ:AMZN) has become infamous in the retail business due to the “Amazon effect,” the term used to describe the e-commerce company’s ever-increasing market share, with traditional retailers unable to adapt to losing such large swaths of their customer base to the lure of online shopping.
Macy’s to Close Westside Pavilion Store and 2 Others in California
Of the three most recent locations set to close in the most recent round of Macy’s stores closing, one will shut down in Laguna Hills Mall in Orange County, another in Stonestown Galleria in San Francisco, and lastly one in Westside Pavilion mall.
These will likely be the first Macy’s stores shut down in 2018, but unlikely to be the last, as the company has been closing dozens of locations throughout the year in order to respond to the changing retail landscape.
The announcements of these retail stores closing came following another weak quarterly report, marking the 11-straight quarterly decline in sales.
The Q3 report showed a 6.1% sales decline, while stores showed a comparable sales drop of four percent. Comparable sales examines sales figures from the previous year at locations that have been open at least that long, relative to the current quarter.
The company is projecting a 2.2% to 3.3% comparable sales drop for its full fiscal year.
Despite the poor results, CEO Jeff Gennette struck an optimistic tone in his statement. “Overall, we’re pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017. Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position. We also saw continued double-digit growth in digital,” he said. “We are excited about our plans for holiday, which is when Macy’s truly shines as a gifting destination. The loyalty program, special in-store experiences and a strong mobile and online presence will help drive holiday sales.”
With the number of Macy’s stores closed in 2017, the company was able to register a profit jump of 35%, although department stores shut down are obviously not going to be able to generate long-term revenue solutions to the problems that hound the company.
Online Shopping Led to Retail Apocalypse in 2017
The poor showing this year is not unique to Macy’s among retailers. Brick-and-mortar stores closing in 2017 has been a theme.
Retail store closings in 2017 have hit some of the biggest and most well-known companies in the world, causing massive shutdowns and layoffs.
Macy’s store closures in 2017 have numbered in the dozens, with these most recent three being added to the 68 that were shuttered earlier in the year. Those shutdowns led to Macy’s job cuts for 2017 numbering roughly 10,000.
The company is continuously searching out new initiatives and programs that will help it avert the retail apocalypse, but other than cost-saving measures like job cuts and store closures, the company has yet to find a tenable solution to the threats facing the retail industry.
While the company is focusing more and more on online, it still lags behind industry leaders like Amazon, who only continue to grow in prominence.
Macy’s stores closing has been a recurrent news story throughout 2017 that may not slow down in 2018.
Macy’s Sales See 11th Straight Quarterly Decline
As mentioned earlier, the company has now experienced 11 straight quarters of decline.
This type of sustained trauma on the market has led to the drastic cost-cutting measures like the mass closures we’ve seen.
As Macy’s quarterly losses continue to mount, the company will only be able to close so many underperforming stores before it runs out, meaning a more permanent solution will have to be reached. Whether that’s a more focused turn towards online or further restructuring, Macy’s will need to find a way to adapt.
Macy’s revenue decline can be seen in the net sales drop to $5.28 billion from $5.63 billion a year earlier. The company’s stock has also declined nearly 45% since the beginning of the year.
“Macy’s is shutting its Westside Pavilion store and others in California,” Los Angeles Times, November 9, 2017.
“Macy’s to Close 2 More Southern California Stores in 2018,” KTLA 5, November 9, 2017.
“Macy’s sales drop for 11th straight quarter,” KYMA, November 9, 2017.
“Macy’s, Inc. Reports Third Quarter 2017 Earnings Above Prior Year and Re-affirms Full-Year Guidance,” Macy’s Inc, November 9, 2017.