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Will Macy's Plan to Close 35 to 40 Stores Help Revive Growth?

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Amid a competitive retail landscape and changing consumer shopping patterns, retailers are making all possible efforts to deploy their resources in order to reap optimum benefits, and Macy's, Inc.M is no exception. The company recently unveiled its plan to shutter 35 to 40 underperforming Macy's stores early next year, with an aim to contain costs and focus on developing omnichannel operations. The company has still not finalized the locations of the stores to be closed. However, it expects the combined revenue from these outlets to be approximately $300 million.

Management stated that it will try to accommodate the workforce affected by store closure in nearby locations. However, the associates to be laid off will be provided with severance benefits. Over a period of five years, the company closed 52 Macy's stores and opened only 12 such stores. It recently announced plans to open 6 new Macy's Backstage locations in fall 2015. Currently, there are 770 Macy's stores in operation.

Subdued consumer demand, port disruption and lower spending by international tourists due to a stronger dollar have dampened the company's performance over the last few quarters. A look at Macy's top-line performance unveils that the company recorded lower-than-expected sales in the last seven quarters. In the trailing seven quarters, Macy's top line missed the Zacks Consensus Estimate by an average of 1.4%. The company now expects total sales to decline 1% in fiscal 2015, as against a 1% increase projected earlier.

However, this Cincinnati, OH-based company is trying hard to put itself back on the growth trajectory. These efforts include Macy's Backstage off-price business, the launch of the new Plenti loyalty rewards program, the introduction of the Thalia Sodi private brand, and the expansion of Bluemercury.

The company has been widening its operations via deals and collaborations to expand its customer base. It inked an agreement with The Men's Wearhouse, Inc. MW to open licensed tuxedo rental shops within its stores. Macy's also announced that it has entered into a joint venture with Fung Retailing Limited - one of the leading retailers in Greater China - in an attempt to tap retailing opportunities in the fast-growing Chinese markets.

In a recent development, Macy's inked a deal with Best Buy Co., Inc. BBY , whereby the latter will open licensed consumer electronics shops in 10 Macy's stores in early November. The licensed shop-in-shops, which will encompass an area of about 300 square feet in Macy's stores, will offer customers Samsung smartphones, tablets and smart watches. Customers can also buy audio devices - Bluetooth speakers and headphones - and accessories - cases, chargers and other peripherals - of Samsung and other brands. The initiative is still in the testing phase and management will decide on its next move only after taking into account customers' response through the holiday season and heading into 2016.

Zacks Rank

Macy's currently carries a Zacks Rank #3 (Hold). However, for the time being, investors can focus on Foot Locker, Inc. FL , which sports a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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