Macy's might shut down more stores

Macy’s is in the process of shutting down 100 stores, or nearly 15% of its store base, as it battles plunging sales and traffic.

But it needs to close even more locations to revive business, according to analysts and industry experts.

The market “probably wants to see another 100 Macy’s stores close,” Jan Kniffen, CEO of consulting frim Worldwide Enterprises, told CNBC Thursday.

Cowen & Co. analyst Oliver Chen echoed that statement in a research note Thursday.

“We fear that Macy’s may need to close more stores than previously announced, and share losses vs. both off-price (TJ Maxx and Ross Stores) and Amazon will continue in the foreseeable future,” Chen wrote.

In a call with analysts on Thursday, Macy’s CEO Jeff Gennette acknowledged that Macy’s might not be done closing stores in the near term.

“I’m not going to say we’re not going to close more stores,” Gennette said. “We do have to stabilise our brick-and-mortar business… That’s where a majority of our business is still done.”

In late January, Macy’s had 673 stores in operation, down from nearly 800 in 2014. By the end of this year, the chain’s store base will drop to around 600.

Macy’s is one of more than a dozen major mall-based chains including JCPenney and Sears that are closing stores this year. Overall, retailers have announced more than 3, 200 store closures since the beginning of the year, and more than a dozen have filed for bankruptcy.

Gennette said the mass closures are necessary, because the US has too many stores, but they have been negatively impacting business in the near term.

“The contraction puts more pressure on some of our mall-based stores, where we have already seen a slowdown in traffic,” Gennette said. “It will take some time to see how [consolidations, closures, and bankruptcies] will impact us.”

He said the company is keeping a close watch on “how store trends evolve” and will keep looking for opportunities where selling a Macy’s store’s real estate would be more valuable than keeping the store in business.

Macy’s is also looking at ways to shrink some of its full-line stores by renting out floors to other retailers, the company said.

Macy’s sales fell 7.5% to $US5.3 billion in the most recent quarter, and same-store sales, or sales at stores open at least a year, fell 5.2%.

“We don’t have our head in the sand, as for the significant challenges we face in trying to get the business growing again,” Gennette said. “These challenges are secular and not cyclical.”

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