Thursday, August 11, 2016

Macy's to Close 100 Stores



Macy's has just announced that it will close 100 full-line stores (out of a current portfolio of 728 Macy’s stores, including 675 full-line locations) to focus on its best-performers.

Most of the stores will close early in 2017, with the balance closing as leases and certain operating covenants expire or are amended or waived. The locations of the 100 stores to be closed will be announced at a later date, once the company makes final decisions.

Austrian-lites are sure to jump on these closings as a signal of problems in the overall economy. But that is far from the case. Brick and mortar retailers continue to be hurt by online retailers such as Amazon.

Further, Macy's reports that in a number of cases, stores will be closed as the value of the real estate exceeds their value to Macy’s as a retail store. This is not the reason you see for the closing of businesses during an overall downturn. Prices are signalling here that there are more demanding uses for the locations,

The company also said that it is in negotiations to sell the Macy’s Men’s Store building on Union Square in San Francisco for redevelopment. San Francisco is in a Federal Reserve Bank created boom right now and no doubt the real estate that the SF Macy's Men's Store sits on is probably one of the most valuable parcels of land in the world.

" If a transaction is finalized, the Union Square Men’s Store likely will be closed after a comprehensive and compelling men’s shopping experience is built within the main Union Square store, which is located across the street. In that scenario, the Men’s Store will remain open until the new shopping environment in the main store is completed." the retailer said.

  -RW

7 comments:

  1. is that what an inflationary surge looks like? :)

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  2. Okay. Some readers may interpret your comments as rationalizing the cognitive dissonance.

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    1. Some may, but the rational among us know that better understanding comes from looking at the whole picture, not cherry-picking anecdotal evidence. Care to take on RW's point about online vs brick and mortar competition--maybe address how the entire retail sector is doing--rather than the ad hominem approach of "cognitive dissonance" accusations?

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  3. "Prices are signalling here that there are more demanding uses for the locations,"

    Or that we're in another Fed-generated real estate bubble.

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    1. How could you possibly get the idea that I don't know we are in the boom phase and that it effects real estate prices?

      Especially since I wrote in the paragraph above:

      "San Francisco is in a Federal Reserve Bank created boom right now and no doubt the real estate that the SF Macy's Men's Store sits on is probably one of the most valuable parcels of land in the world."

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    2. I wasn't implying that you don't know that we are in the boom phase. l am an EPJ Daily Alert subscriber, and I know (and agree) on your position. I was just pointing out that that the "more demanding uses" is the heart of Fed-generated malinvestment.

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  4. It's interesting that Austrians don't agree with where we are in the cycle. My own opinion is that the correction was halted in 2008, and we're now holding it back with stimulus.

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