A Macy's (M) store clinging to life in the dying mall in the outskirts of town will be close to a thing of the past post-pandemic as the retailer stays focused on slashing costs.
After reporting another lackluster year of earnings on Tuesday, Macy's CEO Jeff Gennette told analysts on an earnings conference call he still plans to close 125 stores as part of a plan unveiled in early 2020. About 60 of those stores are closed or are closing soon, Gennette said. The rest will be shuttered by the fourth quarter of 2022.
When all is said and done, Macy's will mostly be found in A and B rated malls, which are often seen as the best looking and most visited in the country. That means very few Macy's stores in C rated locations, or ones with usually weak levels of traffic but that still support a key part of the community.
"Following the closure of all 125 stores, at least 85% of our sales will come from A and B mall stores, and we will ensure through targeted incremental investments that all remaining Macy's represent the best of our brand," Gennette confirmed.
Macy's 2020 underscores Gennette's fierce focus on cutting costs throughout the organization, in large part by dismantling the company's vast store network.
Shredded by COVID-19 related store closures and tepid store traffic, Macy's net sales crashed 29.3% year-over-year to $17.34 billion last year. Macy's swung to an adjusted net loss of $688 million in 2020, compared to a $906 million profit a year earlier. The company forecast adjusted earnings of 40 cents to 90 cents a share this year — the range still puts Macy's below its pre-pandemic adjusted EPS of $2.91 in 2019.
Wall Street surprisingly continues to be patient with Macy's. But sell-side analysts remain in agreement Macy's has an uphill fight moving forward.
"While we do see the Polaris strategy as a good guide for much-needed cost reduction and rightsizing, we remain Neutral rated as we consider the exposure of Macy's largely mall-based fleet, which we expect to continue facing pressures," said Guggenheim Securities analyst Robert Drbul, referring to Macy's three-year plan to stabilize profitability.
We note surprising patience as Macy's stock price continues to act terribly amid a long stretch of disappointing results and various new restructuring initiatives.
Macy's shares are down 6% over the past year, underperforming the S&P 500's 17% gain. The stock is down 34% over a two-year timeframe, and down 63% over the past five years.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn
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