Macy’s To Roll Out Small-Format US Stores in Northeast, West

Macy's unveiled the locations of its next four new small-format stores, expanding the rollout this fall to the U.S. Northeast and West as the chain looks to optimize its national brick-and-mortar footprint.

The New York-based retailer, the owner of its namesake chain as well as Bluemercury and Bloomingdale's, said on a call to discuss its second-quarter earnings that it will open small-format Macy's stores in Boston, Las Vegas and San Diego to follow one that opened in Indiana last week. The eight previously opened small-format locations will continue to be known as Market by Macy's, while the upcoming additions will bear the Macy's name.

For several years now Macy's has been rejiggering and repositioning its store fleet, in some cases closing down large mall stores and opening more of its off-price Backstage locations, while continuing to test off-mall, small-format versions of not only Macy's but also its Bloomingdale's brand, which operate as Bloomie's.

Several other retailers have also opened small-format versions of their stores as a way to penetrate more markets relatively inexpensively and to meet their customers closer to where they live, offering them convenience.

Macy's is "continuing to see how the smaller stores perform and tweaking to get the formula right for a larger rollout," Bill Read, an executive vice president at Retail Specialists, said in an email to CoStar News. "It still remains unclear that these stores will be the future of the brand. They are opening full-price smaller stores in areas dominated by discount apparel stores like Marshalls, Ross and Burlington. While there’s a nice difference between the stores, it remains to be seen if the consumer will elect to walk next door and buy at half the price as what Macy's is offering."
 

In March, Macy's said it planned to open four more small-format Macy's stores this year, but it didn't identify their locations until Tuesday. The one that opened last week was at the Highland Grove Shopping Center at 10353 Indianapolis Blvd. in Highland, Indiana, where it leased a roughly 30,000-square-foot former Marshalls' space in the Bridge 33 Capital-owned retail center.

More Openings

Next month another small-format Macy's is slated to open in San Francisco's South Bay area, as well as at 8 Allstate Road in Boston, and at Arroyo Market Square at 7200 Arroyo Crossing Parkway in Las Vegas.

And in November Macy's plans to open a small-format store at Santee Trolley Square at 9918 Mission Gorge Road in Santee, California, in the San Diego area.

In 2020, Macy’s introduced the first iteration of its small-format stores in the Dallas-Fort Worth area in Southlake. In 2021, Macy’s continued its expansion in the Texas market with the addition of two new locations, while introducing two new stores to the Atlanta area. By the end of 2022, small-format stores expanded further in Atlanta and opened new stores in St. Louis and Chicago, bringing the total to eight locations.

"We remain in the early stages of continuing to scale this opportunity... We're actively evaluating potential locations across the country that will enable us to accelerate growth at the appropriate time," Adrian Mitchell, Macy's chief operating officer and chief financial officer, said on the earnings call.

Macy's officials have said the stores have been doing well, which they reiterated on their earnings call on Tuesday. And earlier this year on an earnings call in June, officials said small-format stores weren't cannibalizing sales from their mall store.
 

Macy's is "making sure that our portfolio has the right number of stores in the right locations that include the quality malls that we're in today as well as, as Adrian (Mitchell) described, the right small-format locations that densify, replace existing stores that may not be as productive or allow us to enter new markets," Tony Spring, the retailer's president and CEO-elect, told Wall Street analysts.

Increased Earnings

Macy's previously announced it will also be opening a third small-format Bloomie's in the University Village at 2623 NE University Village St. in November. It already has Bloomie's in Fairfax, Virginia, and Skokie, Illinois.

"Macy's and Bloomies stores that have been opened over a year had a positive comparable owned-plus-licensed sales growth," Spring said.

In the second quarter, Macy's reported better-than-expected earnings but its revenue was still down. It posted net sales of $5 billion, a decrease of 8% compared with the same time last year. Comparable sales dropped 8.2% on an owned basis and 7.3% on an owned-plus-licensed basis.

"Looking in more detail at the numbers reveals the extent of the challenges ahead," Neil Saunders, managing director of GlobalData, said in a note on Tuesday. "Not only have sales declined, but Macy’s has swung to a net loss of $22 million. While this is more than manageable for the business, it is a consequence of lower margins which have come despite relatively good inventory management."

He added that "off the back of a weak outlook, there is a danger that profitability will be eroded still further which will make investment even harder to justify. It may also prompt Macy’s to make further cuts which could result in even worse standards and conditions in stores."

Macy's didn't immediately respond to an email from CoStar News seeking comment on Saunders' remarks.