Macy’s dropped a bombshell this week when it said it would close 125 stores and lay off more than 2,000 corporate employees. Thousands more store workers are also likely to lose their jobs as the company shutters one-fifth of its locations in the next three years.
There is a widening divide among the nation’s shopping malls: The most profitable properties are thriving, while the rest are stuck in a downward cycle of dwindling traffic, lower sales and disappearing storefronts. The decision by Macy’s to close 125 anchor stores at “lower tier malls,” analysts say, is likely to accelerate the demise of some of the country’s most vulnerable shopping centers.
“Although this is prudent and sensible for Macy’s, it is a bad sign of where some of the country’s second- and third-tier shopping malls are headed,” said Neil Saunders, managing director of GlobalData Retail. “When a major retailer like Macy’s or Sears or J.C. Penney closes, it weakens the viability of the shopping mall and gives people even fewer reasons to stop in.”
Dozens of shopping malls have closed in the past decade, and hundreds more are in decline as they lose key anchor stores. One in four U.S. malls is expected to close by 2022, according to a 2017 report by Credit Suisse.
Mall chains, small businesses and kiosks
Macy’s, which anchors hundreds of U.S. shopping malls, has become a coveted neighbor for all types of smaller retailers that rely on the department store to drive traffic to their shops and kiosks. Macy’s locations also tend to have brightly lit entrances and sprawling parking lots that draw people in.
The loss of a major anchor store, analysts say, will affect the entire industry. Mall staples such as the Gap, J Crew and Victoria’s Secret, which already are facing sales declines and dwindling foot traffic, will probably be hard hit, as will nearby kiosks and food courts.
“The challenges of mid-tier department stores and other mall retailers are hopelessly intertwined at this point,” said Bryan Gildenberg, an analyst for Kantar. “Unless you’re Apple or Sephora, chances are people aren’t interested.”
The retail industry cut 77,475 jobs last year — more than any other sector — according to outplacement firm Challenger, Gray & Christmas. Analysts say they expect the trend to continue this year as retailers such as Express, Pier 1 and Papyrus follow through with planned store closures.
The latest Macy’s announcement is a major blow to workers. The loss of a single department store, they said, can easily affect 150 or more employees. Multiply that by 125, and more than 18,000 jobs could be on the line.
For 26 years, Macy’s has split its headquarters between Cincinnati and New York. Now the company says it will close its Ohio headquarters and move operations to the Big Apple to cut costs. In all, the company said it will lay off about 2,000 workers, or about 10 percent of its corporate and support staff.
City officials say the move will probably cost Cincinnati 500 jobs — and hundreds of thousands of dollars in payroll taxes. Macy’s is one of the largest employers in Cincinnati, which is also home to Procter & Gamble and Kroger.
“Obviously losing 500 jobs is very difficult for this city and could impact other areas like housing,” Council Member Amy Murray said. “It is also a big loss for the community and local nonprofits. Macy’s was an important part of city life here, and that will definitely be missed.”
Macy’s is one of the top sources of advertising revenue for newspapers nationwide, and analysts say widespread store closures and cost-cutting efforts will probably cause a further pullback on print ads.
The company is already scaling back: Politico reported in 2016 that Macy’s had cut about half of its newspaper advertising, costing newspapers $100 million in lost revenue. “Depending on the market, a publisher would see a drop of as much as $900,000 … the equivalent of at least 10 newsroom jobs,” Politico reported.
Macy’s spent $422 million on U.S. advertising in 2018, and $262 million in the first nine months of 2019, according to data from consulting firm Kantar Media.