The logic of 21st century retailing is fewer is more.
The latest retail giant hoping that shrinking will lead to bigger profits is Macy's. On Thursday, it announced it would close 100 of its full-line department stores next year. It hasn't released yet which Macy's will close, but said profitability at most of the targeted stores has been “declining steadily in recent years.” Even though the retailer saw second quarter sales and profits fall from a year ago, it's stock price jumped on the prospect of fewer stores leading to higher profits in the future.
Gap, Sears, Staples and Walmart are among those retailers who have previously announced store closings. They also are among the store operators scheduled to release their latest quarterly results in the week ahead. It's too early to see any significant financial impact of fewer stores, but long-term investors should listen for clues as to progress on the strategy of going smaller for bigger profits.
The retail reduction knows no bounds. It has cut across traditional categories. Sports Authority is no more. Coach is closing a quarter of its stores. And the oldest Sear's, open for 90 years on Chicago's north side, closes this month.
Premium content for only $0.99
For the most comprehensive local coverage, subscribe today.
It’s been a mixed year for retail stock shareholders. The biggest and best performing retail stock in the S&P 500 stock index is Amazon.com. While its margins put it line with other brick and mortar retailers, it need not worry about the performance of storefronts pinching profits.
Financial journalist Tom Hudson hosts “The Sunshine Economy” on WLRN-FM in Miami. Follow him on Twitter @hudsonsview.