Macy’s plight reflects reality for mall stores
Macy’s could lose more than a $1 billion in first quarter as the divide widens between big box stores and mall-based chains.
Macy’s warned Thursday it could lose more than a $1 billion and see sales fall at least 45% during its first fiscal quarter after the coronavirus pandemic paralyzed retail operations nationwide.
The dire preliminary report from the iconic department store chain offers the latest evidence that the pandemic is widening the divide between big box stores like Walmart and Target and mallbased clothing chains.
L Brands, which operates Victoria’s Secret and Bath & Body Works, reported a wider-than-expected loss on a deep sales drop, particularly with the lingerie brand. But Best Buy, the nation’s largest consumer electronics chain, said it retained 81% of its sales during the pandemic quarter — even if with its stores closed to shoppers.
TJX Cos., which operates T.J. Maxx and HomeGoods and Marshals and is usually one of retail darlings, took a beating during the quarter because it was forced to temporarily close its stores and its fledgling online business.
The chain said Thursday it swung to a loss and sales were down a little more than 50%. But the company, known for its deep discounts of major brands, sees “strong initial” sales from the stores that have reopened, and analysts believe the chain will bounce back.
“The divide was already widening between the big box operators and mall based retailers,” said Ken Perkins, president of Retail Metrics, a retail research firm. “The pandemic is now pushing it to the brink.”
Department stores, already weakened before the pandemic, are seeing an uncertain future. Neiman Marcus, Stage Stores and J.C. Penney filed for bankruptcy protection this month and more are expected to go down that road in coming months.
Kohl’s said this week that sales had slumped more than 40% and it lost money in its first quarter. But its CEO Michelle Gass believes the chain will fare better than its peers since most of its stores are at strip centers.
Before the pandemic, big box stores were succeeding keeping up with Amazon as they ramped up online services and beefed up their store experiences. Clothing chains, meanwhile, were struggling to follow shoppers online while facing increasing competition from off-price stores like T.J. Maxx.
The pandemic gave many of these big box stores a natural advantage because they sold essential items like toilet paper and groceries and therefore were allowed to remain open. But many of them also had the infrastructure in place — a network of stores and a bevy of online delivery options — to meet surging online shopping that doubled and tripled in a matter of days.
Perkins said that so far nonmall based stores are on track to post first-quarter earnings drop of 20.5%. That compares to mall-based chains, which are seeing earnings down more than three-fold.