Macy’s, one of the largest department store chains in the United States, recently announced its plans to close approximately 150 underperforming stores. However, while Macy’s struggles to improve its business, its competitors are already eyeing potential opportunities. In interviews with CNBC, Target CEO Brian Cornell and Kohl’s CEO Tom Kingsbury expressed optimism about capitalizing on Macy’s closures to increase their own sales.
One retail chain that could benefit from Macy’s closures is T.J. Maxx, an off-price retailer known for offering discounted merchandise. Jefferies, an equity research firm, suggests that T.J. Maxx could pick up more business, especially since it carries similar merchandise and has stores located near Macy’s locations that might close. Additionally, other off-price chains like Ross and department store rivals like Nordstrom may also see a boost in sales from the closures, as many of Macy’s shoppers already frequent these stores.
The closures of Macy’s stores could potentially put up to $2 billion of market share up for grabs. Although the 150 stores only account for less than 10% of Macy’s sales, this presents an opportunity for other retailers to attract Macy’s customers. Macy’s CEO Tony Spring has stated that closing underperforming stores will allow the company to focus on driving higher sales at other locations. The closures will also free up capital to invest in Macy’s better-performing stores and expand its higher-end department store Bloomingdale’s and beauty chain Bluemercury.
The closure of Macy’s stores will not only impact the department store itself but also have implications for shopping malls, as Macy’s is often an anchor tenant. However, this presents an opportunity for other retailers to fill the void left by Macy’s. Target CEO Brian Cornell highlighted that their stores have benefited from previous closures, such as former Toys R Us locations. Strip malls and online shopping have been increasingly preferred by consumers, leading to the decline of department stores. As a result, big-box stores like Target and specialty players like Abercrombie & Fitch have seen increased market share.
Off-price retailers, in particular, have posed a major competitive threat to department stores and have been the biggest winners from their struggles. They offer similar brands and products at significantly lower prices, attracting a similar customer base. T.J. Maxx, owned by TJX Companies, is well-positioned to benefit from Macy’s closures, as approximately 63% of Macy’s stores have a T.J. Maxx or Marshalls located within a one-mile radius. With approximately 2,500 locations in the U.S., T.J. Maxx has a larger footprint compared to Macy’s.
Kohl’s, another department store chain, also sees an opportunity for growth with Macy’s closures. According to a credit card data analysis by Earnest Analytics, approximately one-third of Macy’s customers also shopped at Kohl’s in the prior 12 months. Kohl’s CEO Tom Kingsbury emphasized that their stores are located in strip centers, making them easily accessible to consumers. However, Kohl’s is also facing similar challenges as Macy’s, with softer discretionary spending and difficulty attracting younger customers.
While Macy’s is closing stores, Target is planning to build more than 300 new stores over the next decade. Although Target did not confirm if they will open stores near shuttered Macy’s locations, CEO Brian Cornell stated that they are always looking at local market opportunities and believe there will continue to be displacement within the retail industry. Target aims to capitalize on these opportunities and continue to grow its market share.
In conclusion, Macy’s decision to close approximately 150 underperforming stores has opened up potential opportunities for its competitors. Off-price retailers like T.J. Maxx, department store chains like Kohl’s, and big-box stores like Target are all eyeing the chance to attract Macy’s customers and increase their own sales. While Macy’s focuses on driving higher sales at its remaining locations, other retailers are ready to step in and fill the void left by the closures. As the retail landscape continues to evolve, these competitors are positioning themselves for growth and success in the industry.
