Tuesday brought more bad news for America’s biggest retailers.
Macy’s reported that margin loss was accelerating as the troubled department store continues with deep discounting of merchandise to stem eroding sales.
Shares of Macy’s fell 8.2% in Tuesday’s trading as the company said it could see a 40% in margin levels as it battles with high inventory coming out of the 2016 holiday season.
Most retailers were down big on the Macy’s news. JCPenny was down 4%, Kohl’s fell 5.8% and Nordstrom was off 3.6%.
Many big box stores saw weak holiday sales forcing deep discounting, which squeeze already reduced margins and come right down to the bottom line.
In other retail retaliation, Sears came out after the bell on Tuesday to say it was closing an additional 72 stores this year. Earlier this year CEO Eddie Lampert announced he was closing about 180 Sears and K-Mart stores along with some Sears Auto Centers.
These new announced closures bring the number of Sears’ store to around 1,200, down from 2,080 fin 2012. Sears shares were off more than 1% in Wednesday pre-market trading.
So what can retailers do to stem the outgoing tide?
“We don’t need the massive parking lots that we had in the 1970s,” Doug Sessler, the head of Macy’s real estate division, told analysts during the company’s investor day on Tuesday, my New York Post colleague reported.
This is a huge departure for these big box stores. They have acres of parking lots, which sit idle for many months, and the Macy’s and others are looking to create strip malls and standalone properties to bring in rental revenue.
It appears the new model, which I doubt has legs since it’s doubling down on the thought that brick and mortar can still work. Macy’s says they are looking for restaurants and other businesses like medical facilities to take up the space.
Macy’s is already selling space inside its stores to different brands in order to bring in revenue. So now they will compete with the mall operators, who are looking at open storefronts inside the mall, to attract tenants.