Macy’s struggle no surprise, analyst says retail ‘death warmed over’


Venerable merchandiser Macy’s finds itself squeezed by Amazon, hampered by its last-century business model and picked apart by rivals touting lower prices or better service.

So shoppers tend to greet the iconic department store’s struggles — including Thursday’s announcement that Macy’s would close 100 of its 728 locations — with a shrug.

“It doesn’t surprise me, because Amazon is killing everybody,” said Freda Frieden of Palm Beach Gardens.

To be clear, Frieden is no Macy’s hater — she considers the chain her favorite shopping destination. Frieden visited the location at Gardens Mall on Thursday to scout for deals on items such as Lucky Brand jeans.

Macy’s, the nation’s largest department store chain, didn’t divulge which locations it will close, and it’s unclear whether any of its five department stores in Palm Beach County are on the hit list. Macy’s also runs a furniture store west of Boca Raton, but the company said closings will target its “full-line” locations.

Shares of Macy’s, which trades on the New York Stock Exchange, soared after its announcement. The latest downsizing comes after the retailer in January offloaded 40 stores, reflecting the ongoing pressure on the traditional merchandisers that once were the backbone of the retail industry.

Macy’s, the nation’s largest department store chain, has outlasted its less-fortunate rivals. Sears and J.C. Penney hit rough patches long before Macy’s did.

But changing consumer behavior roils the retail industry even as the economy recovers. UPS said recently that amid a “retail revolution,” American shoppers for the first time are spending more online than in stores.

The shift has created turmoil for brick-and-mortar merchandisers. Sports Authority this year closed all 460 of its stores. Office Depot, fresh off closing 400 stores, just announced plans to shutter 300 more locations. Even Walmart has reduced its footprint.

Macy’s, with its sprawling stores occupying cavernous corners of traditional malls, finds itself out of step with retail trends, said Howard Davidowitz, chairman of Davidowitz & Associates, a consulting firm in New York.

“The department store sector is the weakest sector in retail,” Davidowitz said. “You’ve got competitors like T.J. Maxx eating their lunch. And the mall is not a good place to be right now.”

Macy’s woes are partly self-inflicted. Jennifer Millman, an executive recruiter in Delray Beach, is a former Macy’s fan who now feels the store has grown “stale.”

“Macy’s was a great retailer 15 years ago,” Millman said. “But Macy’s hasn’t really changed their format or their store layout, and it’s certainly not an experience. They haven’t adapted. It’s just not cool.”

In something of a paradox, even as many retailers shrink, consumers feel as if they’ve never had more places to shop. Macy’s, with its lineup of Levi’s jeans, Fossil watches, Nike sneakers and Under Armour workout gear, markets inventory that’s far from unique. Consumers can find similar wares at Kohl’s, Dillard’s and Dick’s Sporting Goods, not to mention the brands’ own stores at Palm Beach Outlets.

Meanwhile, Internet shoppers can hunt for deals on Amazon.com, not to mention Macy’s own website. Underscoring the rise of e-commerce, Walmart said Monday it would pay $3 billion for shopping site Jet.com.

Kim Hill of Boca Raton browsed this past week in the shoe department at the CityPlace Macy’s. She and her daughters left empty-handed, although they planned to return to pick up a pair of back-to-school Nikes. Hill’s daughters seemed far more excited about a trip to Charming Charlie, the purveyor of purses and jewelry that has a location at CityPlace.

“Every once in a while, you want a department store,” Hill said. “But it’s really not a place I go very often.”

Hill said she often shops online, although other shoppers say they still buy clothes in stores.

“I like to feel things,” said Shelley Jahn of Jupiter, who bought an item at the Macy’s in Palm Beach Gardens this past week.

Millman, Hill and Jahn all say they favor Nordstrom — known for its high-end goods, stellar service and generous return policy — over the middle-brow Macy’s.

While Nordstrom and Saks Fifth Avenue pressure Macy’s from the high-touch side of retailing, off-price chains T.J. Maxx, Marshalls, Ross and Burlington Coat Factory chip away at bargain-minded consumers. Lidi Watkin, a health aide from Sunrise who accompanied clients to The Gardens Mall this past week, said she opts for retailers that sell similar merchandise to Macy’s at deeper discounts.

“I shop a lot more at T.J. Maxx and Marshalls, because my budget isn’t that high,” Watkin said.

As wage stagnation has afflicted the middle class in recent years, discounters have thrived. Even high-end retailers such as Nordstrom and Saks have branched into bargains with Nordstrom Rack and Saks Off Fifth, a trend Macy’s has been slow to embrace.

“People are trading down, because most people have less money,” Davidowitz said.

Then there’s the matter of the sheer cost of Macy’s and its network of massive locations. The typical Macy’s store at a mall in Palm Beach County encompasses more than 200,000 square feet, a vestige of a pre-Amazon world when retailers pleased shoppers by stocking huge inventories.

“With online sales exploding, they’re too big, and they’ve got too much overhead,” Davidowitz said. “These huge stores are death warmed over.”


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