As Macy's seeks efficiency, which stores will it close?

CINCINNATI — Macy’s (M) is taking a hard look at its real estate portfolio, including nearly 800 stores nationwide, as it seeks to appease impatient shareholders concerned about sliding retail sales.

No stores will escape scrutiny as the Cincinnati-based retailer decides what stores to shutter in early 2016. The move, for which details could be revealed as early as this week, is part of the company's plan to eliminate weaker performing stores and make its operation more efficient.

CEO Terry Lundgren told analysts last month the company expects to close more stores in the future.

“It’s no surprise as they move more of their business online,” said Jan Rogers Kniffen, a New York-based retail consultant. “They have too many stores.”

Macy’s is under intense pressure to boost results after failing to deliver sales growth in 2015.

In November, Macy's said that profit dropped 46% to $118 million during the third quarter ended Oct. 31, down from $217 million in the same period a year ago. Sales slipped 5% to $5.9 billion, missing Wall Street expectations of $6.1 billion.

Macy's stock closed at $35.79 Monday, up 2%, but significantly down from its 52- week high of $73.61.

So far, the retailer is working to sell underused real estate to third-party developers, having already cut such deals with locations in Brooklyn and Seattle. It also tapped an adviser to identify how it can redevelopment high-profile locations such as Manhattan, San Francisco, Chicago and Minneapolis, where it can maintain a retail presence but add features such as residences or office space.

In addition, Macy’s launched its new discount concept Macy’s Backstage and bought beauty and spa retailer Bluemercury with the hopes of expanding its reach.

Underused space inside some Macy’s is being leased for small versions of such stores as Sunglass Hut, Finish Line and Best Buy.

Macy’s is one of the few middle market department stores left standing as dozens of companies disappeared through acquisitions or closure in the last few decades, said Kniffen, chief executive of J Rogers Kniffen WWE, a firm that advises large institutional investors and private equity funds on retail investments.

Kniffen said Macy’s still has international name recognition. Company executives say Macy’s is the nation’s seventh-largest online retailer, which means its ability to extend the brand to e-commerce channels has had some degree of success. It also has a lot of cash to help it manage through its evolution.

But if current trends continue -- including shoppers’ growing reliance on e-commerce -- then Macy’s could end up cutting about a quarter of its stores over the next several years, says Kniffen.

Department stores have had to evolve as customer preferences for goods, shopper demographics and competition have changed in the retail landscape, said David Ginsburg, president and CEO of Downtown Cincinnati Inc. Stores such as Macy’s have moved from the 500,000-square-foot footprints.

“There is no more dynamic business than retail,” said Ginsburg, who spent more than 20 years of his career in the retail sector. “You could have tough sales one day and then things come back.”

Company representatives declined to disclose the stores on the chopping block. Macy’s announced the closure of 14 stores in last January, just about a week after the end of the 2014-2015 holiday shopping season.

With its store closure plans, Macy’s is betting that customers will instead travel to a different store within their metro area or get what they want from its e-commerce channels. Shopping centers typically define their main customer base as being located within three to 10 miles, but department stores are typically destination shopping venues that can draw customers from wider areas.

Macy’s and other stores like being near interstate highways and major population centers. With new stores, there’s a preference of being located near fast-growing populations with higher levels of disposable income. Those new announcements for stores typically haven’t happened around the Midwest, where population growth lags other locations.

Contributing: James Pilcher, The Cincinnati Enquirer.