Here's why Macy's decision to close 100 stores isn't such a bad thing

Justine Griffin/Tampa Bay Times - A decade ago, the country's largest department store chain was announcing new store openings, not closings.

Macy's grew fast — from 2005 to 2006, the chain nearly doubled in size to 850 stores across the country. But two years later, the retailer's grip on the American department store business would begin a long, 10-year slip.

Macy's will operate about 628 department stores in the U.S. after it shutters 100 of them by early next year, the retailer announced Thursday. This move comes after the chain closed 40 stores in the spring. Macy's did not say which stores it would close, so it's unknown if any will be in Tampa Bay — though it seems likely the region will lose some stores. 

After Macy's made the announcement Thursday, its stock soared, closing at $39.81 a share, up 17 percent for the day. Wall Street sees a company that's smartly trimming under-performing stores and preparing for the future, some retail analysts say. After six quarters of plummeting sales and revenues, closing only 14 percent of its department store business isn't that bad. Meanwhile, Macy's is looking for growth in other areas outside of what's quickly becoming an outdated department store business. 

"They are choosing to focus on their core stores," said Faith Hope Consolo, chairman of the Retail Group with Douglas Elliman Real Estate in New York City. "It's a smart move to re-evaluate and channel their energy into their high-performing and high-profile stores. Remember, Macy's is big, they're the 900-pound gorilla in the room. They expanded more, which means they have more room to trim."

Department store chains have defined the way Americans have traditionally shopped for clothing and home goods for decades. But in recent years, those household name brands have reported significant sales losses year over year and are shuttering stores faster than they're opening them. Experts say it's because department stores are antiquated and they're failing to keep up with the fickle demands of younger shoppers. 

Unlike Sears and J.C. Penney, which continue to struggle with their traditional store format, Macy's is looking for new avenues of growth in alternative ways.

Macy's launched its new discount store, Macy's Backstage, in New York late last year. Now there are 15 locations in the Northeast and Texas. Backstage aims to compete with "fast fashion" mall brands like H&M and even discount strip center staples like T.J. Maxx and Marshalls, which sell cheap clothes at cheaper prices.

Nordstrom, too, has found success in this model — the Seattle-based retailer opens Nordstrom Rack stores almost exclusively these days instead of department stores. Nordstrom hasn't opened a new department store in Florida since 2008, but it has opened dozens of Nordstrom Rack locations across the state in that time, including one in Clearwater in September.

Macy's also purchased Bluemercury Inc., one of the fastest-growing luxury beauty retailers and spas in the country, for $210 million in March. It further shows the retailer's interest in investing in brands that young consumers care about, Consolo said.

There is some value to closing stores, too.

"They're taking a real proactive approach to their real estate," said Jeff Green, a retail analyst based in Phoenix. "Remember, they own a lot of their real estate, and they may be able to sell that back to the developers or someone else at a pretty good multiple. They see the value is in the real estate and not necessarily in the operating business of some of these stores."

There are 13 Macy's stores from Sarasota to Pasco counties, including furniture galleries. Some communities have several department stores near one another, like the Macy's stores at WestShore Plaza, Citrus Park and University Mall in Tampa. Sarasota also has three Macy's department stores in the region's three area malls.

"The major markets that have several stores will likely lose one or two," Green said. "And smaller markets that are close enough to bigger metro areas."

The last Macy's department store to close in Tampa Bay was the Gulf View Square mall location in New Port Richey last year.

Overall, Macy's revenue fell 3.9 percent to $5.87 billion during the second quarter. Sales were down 2.6 percent. That's the sixth straight quarterly decline.

"I wouldn't be surprised if one or two closed in Florida, but most here are doing pretty well," said Dale Scott, an ambassador with the International Council of Shopping Centers and a director with Hawkins Construction. "Retail has changed a lot. These companies have to plan now where they are going to be five years from now."