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.

Ask An Expert: Which Runway Trends Have Made It To The Mall This Season?

A look from Lanvin resort 2010, via Style.com

In this new series, I ask my best sources to offer up insider knowledge.

Brian Sozzi isn’t afraid to admit that he likes to shop…at the mall. The equity research analyst covers retail for boutique firm Wall Street Strategies. When he’s not crunching numbers, he’s in the stores researching trends, consumer behavior, product selection and quality. This season, he likes what’s available: “Broadly speaking, I happen to think fashion in the malls is the strongest I have seen in some time.”

Why is that? Well, consumers haven’t been buying, so retailers diversified product, listening more to the messages designers send down the runway. Here are some of the high-fashion inspired trends that Sozzi thinks will sell well in the stores:

Latin America. (As seen at Michael Bastian spring 2010; Lanvin resort 2010)  Anthropologie’s embroidered patchwork tunic adds a vintage flair with mismatched floral prints.

Military. (As seen at Haider Ackerman spring 2010, Chloe spring 2010) Old Navy’s cargo pants are back as are fatigue jackets, available at J.Crew.

Plaid. (As seen at DSquared fall 2009, Richard Chai spring 2010) The Gap is big on plaid this season, as are Uniqlo, American Eagle, Topshop and of course, Abercrombie & Fitch.