Malls Feeling Heat as Stores Closed by Large Chains

The decision by Macy’s to close 100 of its stores, just the latest in a number of announcements of downsizing by different department store chains, will come down hard on the operators of shopping malls in the U.S.

Macy’s, J.C. Penney, Sears and others, including a few specialty retailers, see sales as well as profits being eaten up by retailers online and shoppers looking for fresher concepts in retailing.

A research company specializing in retail, Green Street Advisors said that chains would need to close a combined 800 stores to achieve the same profitability that they experienced just a decade ago.

Executives in retail know they are facing a problem even with the cuts in stores, with thousands of employees’ jobs hanging in the balance.

Terry Lundgren the CEO at Macy’s said that the U.S. was over-stored. Lundgren said the company was getting out in front of what is known as a trend and that is clients are balancing spending between stores and online.

Operators of shopping centers were startled by the announcement on Thursday that Macy’s would be shuttering 100 of its stores.

One such operator is Simon Property Group, which operators 200 shopping centers. Its shares dropped by 2% on the news Thursday.

Simon’s largest tenant is Macy’s, which occupy over 12.5% of the U.S. portfolio for Simon. Macy’s has 122 of its stores in properties owned by Simon, which accounted for over 23 million sq. ft.

Two other operators of shopping centers Kimco Realty and General Growth also had modest drops of stock on Thursday.

For malls, the problem of losing Macy’s stores is serious, especially stores that are known as anchor stores that attract more customers to the mall because of their name and track record.

COO Rick Sokolov of Simon said during an earnings call back in May that his portfolio of malls has 441 department stores and only 1 is vacant.

Chain stores that have announced closures this year include Ralph Lauren, which will close 50 locations. Sears announced it would close 78 of its Kmart and Sears stores. Aeropostale said it would be closing 113 stores.

Sports Authority is shuttering its complete line of stores. At the same time, Tailored Brands announced it was closing between 80 and 90 of its Jos. A. bank locations, as well as 58 outlet and factory stores and as many as 110 Men’s Warehouse Tux locations.

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