Ax falls on 68 Macy's stores; Lehigh Valley Mall location spared

Jon Harris/The Morning Call  -  Struggling department store chain Macy's will close six stores in Pennsylvania this year, but its Lehigh Valley Mall location won't be one of them.

The retailer on Wednesday announced 68 store closings across the country, including the Macy's at the Plymouth Meeting Mall in Montgomery County and the Macy's at the Neshaminy Mall in Bucks County.

The other affected Macy's stores in Pennsylvania are in Mercer, Beaver, Lycoming and Washington counties. The six Macy's locations slated to close in Pennsylvania employ a total of 438 associates, who will be offered severance benefits or, where possible, relocation to nearby stores.

Lehigh Valley Mall, co-owned by Simon Property Group and Pennsylvania Real Estate Investment Trust, has a leasable area of 1.18 million square feet and is anchored by Macy's, Boscov's and J.C. Penney.

"If you look at the mall, it performs extremely well," said Green, owner of Jeff Green Partners in Phoenix. "You've got to assume that the Macy's also performs well."

Macy's spokeswoman Holly Thomas said the chain can't comment on sales by individual store.

The Macy's stores slated to close across the country are part of the chain's previously announced plan to close about 100 stores as it struggles to redefine itself amid changing shopping patterns. The company said Wednesday it intends to "opportunistically close" about 30 additional stores over the next few years as leases or operating covenants expire or sale transactions are completed.

The store closings are expected to hurt Macy's 2017 sales by about $575 million, and the company estimated 3,900 employees will be displaced.

"It is essential that we maintain a healthy portfolio of the right stores in the right places," Macy's Chairman and CEO Terry Lundgren said in a news release. "Our plan to close approximately 100 stores over the next few years is an important part of our strategy to help us right-size our physical footprint as we expand our digital reach.

"We are closing locations that are unproductive or are no longer robust shopping destinations due to changes in the local retail shopping landscape, as well as monetizing locations with highly valued real estate."

Macy's has been pressured by investors, such as Starboard Value, to get money out of its real estate, especially during a sustained sales slump, as traditional brick-and-mortar retailers struggle to compete with online behemoths like Amazon.

Starboard estimates Macy's real estate assets are worth $21 billion, more than the enterprise value of its retail operations.

And those brick-and-mortar retail operations registered a disappointing season of holiday sales, Macy's also announced Wednesday.

The chain said sales at its established stores declined by 2.1 percent in November and December when compared with the same period last year.

In a statement, Lundgren said the company expected sales would be stronger and pointed to changing customer behavior as one of the reasons for the decline.

"We believe that our performance during the holiday season reflects the broader challenges facing much of the retail industry," Lundgren said, noting that while Macy's active and cold-weather merchandise performed well, its sales of handbags and watches showed continued weakness.

Macy's now expects full-year adjusted earnings per share of between $2.95 and $3.10, down from its previous guidance of $3.15 to $3.40.

As of 5:50 p.m. Wednesday, shares of Macy's declined about 10 percent to $32.20 in after-hours trading.