Come early 2017, the Macy’s retail landscape is going to look quite different. The retailer just announced it will be closing 100–that’s 15%–of all its stores. The news came after Macy’s reported second quarter earnings, which were well received by Wall Street. Macy’s shares got a 16% surge in early trading today, its best day since 2008.
Earnings Beat Estimates
While earnings followed Macy’s track of six straight quarters of decline, this quarter’s sales loss was narrower and actually beat estimates. Macy’s reported earnings, excluding charges, of 54 cents per share, on revenue of $5.87 billion. Analysts had expected earnings of 45 cents a share on $5.75 billion in revenue, according to a consensus estimate from Thomson Reuters.
Additionally, Q2 comp sales fell only 2%, aided by the closing of 41 underperforming stores. Retail Metrics had forecast a 4.4% decline.
“Whenever there’s been a setback in our company, we’ve been first in the industry to take a very aggressive stance at moving us forward,” CEO Terry Lundgren told CNBC’s “Squawk Box.” “That’s just part of it. By closing 100 stores… we’re getting out in front of this.”
Analysts were optimistic: “Although this is partly a reaction to being in a tough competitive position within the landscape, [Macy’s is] being more offensive than most, and this is the right move,” Citi analyst Paul Lejuez told CNBC. “It is not only good for Macy’s but also for the industry.”
Macy’s has been carefully watching its store count and analyzing performances. The retailer operates 728 stores, including 675 of its traditional full-price locations. In the past six years, it closed 90 Macy’s stores and opened 13 new locations. It opened six off-price Macy’s Backstage stores in 2015 and is also expanding its Bluemercury beauty boutique presence.
Macy’s will still have stores in 49 of the top 50 U.S. markets based on population, even after the store closings. Jeff Gennette, who will step into departing Terry Lundgren’s CEO shoes in 2017, said Macy’s will use the savings from its store closings to focus on its “highest-potential locations,” and invest “more aggressively in digital and mobile.”