Will Lehigh Valley Mall Macy's survive closure threat?

Anthony Salamone/The Morning Call - Macy’s announced plans Thursday to close about 100 stores nationwide as it struggles to define itself amid changing shopping patterns, but a retail analyst who follows the Valley predicts the chain’s 40-year anchor at Lehigh Valley Mall likely will be spared in the consolidation.

The closures represent close to 14 percent of the chain’s 728 stores nationwide. It follows Macy’s move to shutter 40 stores in the spring and comes as the company reported another quarter of falling profits and sales.

Analyst Jeff Green, owner of Jeff Green Partners in Phoenix, said he thinks the local Macy’s is safe, in large part because of the mall’s performance.

“If you look at the mall, it performs extremely well,” Green said. “You’ve got to assume that the Macy’s also performs well.”

Data from the mall’s owners, Simon Property Group and Pennsylvania Real Estate Investment Trust, appear to support that assessment. 

The mall, including its two-level enclosed shopping mall portion and its attached horseshoe-shaped outdoor lifestyle center, has an occupancy rate of more than 98 percent, according to Simon Property Group’s annual report.

And its sales per square foot as of Dec. 31 were $566, up from $540 a year earlier, according to a filing with the U.S. Securities and Exchange Commission. That’s a “very good number,” said Green, who gave the mall an “A-minus” grade in sales per square foot.

Macy’s is one of three anchor tenants in the Whitehall Township mall. The next closest Macy’s is in North Wales, Montgomery County.

Macy’s had been a stellar performer since the Great Recession, but in the past year and a half it has seen slowing sales as it battles competition on all fronts and changing shopping patterns. People are spending more on home improvement as well as experiences like travel or spas. And when they do buy clothing, they're going to T.J. Maxx or fast-fashion chains like H&M.

Shoppers also are increasingly researching and buying online and gravitating toward Amazon.com, which is bolstering its private label fashion brands. By some forecasts, Amazon.com is expected to surpass Macy’s as the largest online seller of clothing next year.

For those reasons, other analysts were not so clear-cut about Macy’s fate locally.

“We are so over-stored,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a New York City retail consulting and investment banking firm. “We’ve got more than double the number of retail square footage of any country in the world. At the same time, we’ve got an explosion of online shopping, and the middle class is being crushed.”

Brian Dondanville, a retail consultant at Chicago’s McMillan Doolittle, said which stores wind up on the chopping block could hinge on lease terms between Macy’s and mall owners like Simon Property Group. He also said mall owners that lose a large anchor like Macy’s need to rethink the use of that space.

“They’ve really got to up the wow factor,” Dondanville said.

Macy’s spokesman Jim Sluzewski said there is no timetable for when the store closings will be announced. “When we have a finalized list, we will announce it,” he said. Sluzewski declined to release sales figures for the Lehigh Valley Mall store. 

Last year, Macy’s announced planshttp://www.mcall.com/business/mc-lehigh-valley-mall-macys-20150909-story.html to close 40 stores, including two in Pennsylvania and one in New Jersey. 

Macy’s, along with Boscov’s and JC Penney, is one of three anchors at the Lehigh Valley Mall. It began as Bamberger’s, a Newark-based retailer, when the mall opened in October 1976. Ten years later, all Bamberger’s stores were renamed Macy’s. R.H. Macy Co. had purchased the Bamberger’s chain in 1929.

Also Thursday, Macy’s announced its earnings for the quarter ended July 30. The company said it earned $11 million, or 3 cents per share, compared with $217 million, or 64 cents per share, a year earlier. Excluding charges related to store closings, the company earned 51 cents, which is above the 48 cent estimate from financial data analyst FactSet.

Revenue fell 3.9 percent to $5.87 billion. That topped the $5.77 billion estimate from FactSet. 

The company said it was sticking to its outlook. Macy’s had said in May that it expects revenue at stores open at least a year to be down 3 percent to 4 percent. 

Wall Street liked the Macy’s news: Its shares closed at $39.81, up $5.81 or 17 percent, in New York Stock Exchange trading.