What Macy’s (M) Store Closings Really Mean: More Dead Malls

Brian Sozzi, a crack equity analyst over at Wall Street Strategies, says that while closing five underperfoming stores in 2010 was an easy/smart financial decision for Macy’s, the end of those stores will wreak havoc on the malls that they anchor. See his client note below:

There is more to a retail store closure then a company press release.  In Macy’s (M) announcing five store closures today, it will be leaving malls already hurt by a wave of national chain closures since 2008.  As a result, the exit of Macy’s could cause other leftover anchor tenants to vacate and create a “dead mall” syndrome, where vacancy rates rises above 70%.

Looking at two specific closures in the Macy’s press release, the stores were likely operating at serious losses due to changing demographics of the city where the mall resides.

All in all, the store closures were in cities with unemployment and median income levels significantly worse than state and national averages.  People in these areas shifted what discretionary purchases they were making to better kept/promoted malls or big box stores able to drive low prices on a range of merchandise in a one-stop format.