Propmodo Daily

By Franco Faraudo · Feb. 28, 2024

Greetings!

When was the last time you went to a Macy’s? Was that Macy’s, by any chance, inside of a mall? If your favorite Macy’s is inside a mall, you are not alone. Macy’s announced that it would be shutting down 150 of its stores to focus on its better-performing locations and test out its small concept stores in yesterday’s earnings call. We dug into the retail’s new strategy in today’s daily.

Also, the property industry, already grappling with labor shortages in construction, janitorial services, and HVAC maintenance, faces a new and crucial challenge: a lack of qualified cybersecurity professionals. It's important for real estate companies to acknowledge this emerging shortage and its potential impact on their operations and data security.

This week, Propmodo Technology is taking a deep dive into Building Operations & Controls! We explore HVAC automation, the strategies property managers are using to maximize results with less resources, and the potential future of robots in the office. Be sure to check out "The State of Commercial Real Estate Property Management for 2024," a new report from our sponsor Building Engines.

Now, let's dig in!

Macy’s “Bold New Chapter” Includes Fewer, Smaller, and More Experimental Stores

While Macy's has built its brand through its extensive network of physical stores in downtown areas and shopping malls, the company is recognizing the changing landscape of retail. To adapt and stay competitive, Macy's is rethinking its business model, and its brick-and-mortar presence is becoming a less central component.

In yesterday's earnings call, new CEO Tony Spring explained Macy's Bold New Chapter business strategy. "It is the thoughtful culmination of comprehensive research and reflection that began in earnest early last year," he said. "A Bold New Chapter is designed to return Macy's, Inc.'s enterprise growth, unlock shareholder value, and better serve our customers."

The largest part of this strategy is the "balanced portfolio approach" that includes closing 150 counterproductive stores. Macy's did its research, looking at demographics, psychographics, digital demand, the condition of the centers, and the condition of the stores. That research revealed that in 2023, 25 percent of Macy's gross square footage only accounted for less than 10 percent of the company's sales. Those 150 stores will be closed in the coming months and years to shift the focus back to the stores that have growth potential.

Most of the stores that will remain are in malls. This echoes other retailers' struggles with non-mall shopping districts, many of which are in neighborhoods still suffering from the drop in office attendance. But that doesn't mean that Macy's is writing off its non-mall stores just yet. "We want to also pursue off-mall to make sure that we have availability and convenience and where a lot of put steps are going today," Spring said. "But we're going to remain a majority mall-based freestanding store company with the right complement of off-mall stores to Macy's and Bloomingdale's more convenient."

Of those "off-mall" stores, Macy's is focusing on smaller format locations, like their smaller Bloomingdale's concept called Bloomies, and incubator stores that test out new products. The hope is that this more streamlined retail portfolio will help them grow their omnichannel strategy, which relies on the ability of online shoppers to try, buy, and return the merchandise at physical locations.

There is another big advantage to shrinking their brick-and-mortar retail footprint as well. From 2015 to 2023, Macy's made $2.4 billion from the sale and "monetization" of their closed stores. They hope to grow that number as they struggle to keep up with investors' expectations.

As much as has been said about the death of the American mall, Macy's still seems to see value in them. Macy's will still operate around 350 stores even after the upcoming closures, but most of them will be further from a financial district and closer to a food court.

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Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

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