Macy’s to close three stores in Cal­i­for­nia

Exit from lo­ca­tions in­clud­ing L.A.’s West­side Pavil­ion comes amid con­sumer shift to buying on­line.

Los Angeles Times - - BUSINESS - By James F. Peltz and Samantha Ma­sunaga

Macy’s Inc. plans to close its store at Los Angeles’ West­side Pavil­ion mall, as well as two oth­ers in Cal­i­for­nia, the re­tail giant said Thurs­day as it grap­ples with con­sumers’ in­creas­ing shift to on­line shop­ping.

The clo­sures, which in­clude Macy’s stores at the La­guna Hills Mall in Or­ange County and the Ston­estown Gal­le­ria in San Fran­cisco, will oc­cur early next year. It was not im­me­di­ately known how many jobs would be af­fected.

The Macy’s clo­sure at West­side Pavil­ion prob­a­bly is re­lated to the re­cent open­ing of a new Macy’s store at the nearby West­field Cen­tury City mall, said Ron Fried­man, co-head of re­tail and con­sumer prod­ucts for Mar­cum.

“It’s old, it hasn’t been re­freshed,” he said of West­side Pavil­ion. “Why would I go to the Pavil­ion when I can go to brand new Cen­tury City?”

Lo­cated less than 2 miles from West­side Pavil­ion, West­field Cen­tury City is wrap­ping up a two-year, $1bil­lion makeover into a high­end hang­out and shop­ping des­ti­na­tion.

The ren­o­va­tion brings five valet sta­tions and more than 200 mostly new shops and restau­rants, in­clud­ing famed chef Mario Batali’s Eataly.

An­a­lysts have said that malls of the fu­ture must be en­ter­tain­ment cen­ters with a plethora of eat­ing op­tions to at­tract young con­sumers, rather than the cur­rent model that’s heav­ily fo­cused on ap­parel shops.

West­side Pavil­ion, owned by Santa Mon­ica-based mall op­er­a­tor Mac­erich Co., re­cently lost its other an­chor ten­ant, Nord­strom, to West­field Cen­tury City.

Ki Bin Kim, se­nior real es­tate in­vest­ment trust an­a­lyst and man­ag­ing direc­tor at SunTrust Robin­son Humphrey, de­scribed West­side Pavil­ion as a “fan­tas­tic piece of real es­tate” that has the bad luck of be­ing sand­wiched be­tween West­field Cen­tury City and 3rd Street Prom­e­nade in Santa Mon­ica.

“Over time, it’s lost value,” he said. “This is po­ten­tially an op­por­tu­nity for the com­pany to do some­thing dif­fer­ent with this as­set.”

West­side Pavil­ion rep­re­sen­ta­tives did not re­spond to a re­quest for com­ment on Macy’s plans.

Kim em­pha­sized that the Macy’s clo­sure was not a big­ger state­ment about the mall busi­ness.

“This is a unique sit­u­a­tion for a unique as­set,” Kim said.

Macy’s an­nounced the clo­sure of 68 stores nationwide and cut 10,000 jobs early this year, in­clud­ing lo­ca­tions in Simi Val­ley, Santa Bar­bara and San Diego.

Those clo­sures are one rea­son Macy’s fis­cal thirdquar­ter profit — ex­clud­ing one-time re­struc­tur­ing and other costs — jumped 35% from a year ear­lier de­spite a 6.1% sales de­cline, the Cincin­nati-based com­pany said.

Macy’s also said its com­pa­ra­ble sales — those at stores open at least a year, a key gauge of re­tail per­for­mance — fell 4% in the quar­ter that ended Oct. 28 com­pared with a year ear­lier. The com­pany fore­cast a com­pa­ra­ble-sales drop of 2.2% to 3.3% for its full fis­cal year.

Even so, Macy’s Chief Ex­ec­u­tive Jeff Gen­nette said he was “ex­cited about our plans” for the hol­i­day sea­son, in part be­cause of a new loy­alty re­wards pro­gram.

“The loy­alty pro­gram, spe­cial in-store ex­pe­ri­ences and a strong mo­bile and on­line pres­ence will help drive hol­i­day sales,” he said in a state­ment.

Macy’s said its thirdquar­ter profit, ex­clud­ing the one-time charges, equaled 23 cents a share, up from 17 cents in the year-ear­lier quar­ter. Sales fell to $5.28 bil­lion from $5.63 bil­lion.

Key to im­prov­ing Macy’s fi­nan­cial re­sults, an­a­lyst Fried­man said, would be to re­duce its store size to at­tract mil­len­ni­als, who aren’t as in­ter­ested in shop­ping at malls and in large depart­ment stores.

“They have to change their busi­ness model to be suc­cess­ful,” he said.

Macy’s and dozens of other ma­jor U.S. re­tail­ers have been clos­ing stores and oth­er­wise scal­ing back as shop­pers in­creas­ingly make pur­chases on the in­ter­net at sites such as Ama­zon.com. On­line shop­ping left many bricks-and-mor­tar lo­ca­tions un­prof­itable as their foot traf­fic de­clines.

Kohl’s Corp., an­other ma­jor re­tailer heav­ily de­pen­dent on ap­parel sales, said Thurs­day that its fis­cal third-quar­ter sales of $4.3 bil­lion were flat com­pared with a year ear­lier, but its com­pa­ra­ble-store sales edged up 0.1%.

The chain’s third-quar­ter earn­ings, ex­clud­ing one­time charges, fell to 70 cents a share, down 13% from a year ear­lier.

Shares of Macy’s closed at $19.50, up 10.98%.

Kohl’s — with 1,156 stores nationwide, in­clud­ing 116 in Cal­i­for­nia — en­joyed “strong re­sults” dur­ing the back-toschool sea­son but a “soft” mid­dle of the quar­ter “as we ex­pe­ri­enced dis­rup­tions from the hur­ri­canes and other un­sea­son­able weather,” Kohl’s CEO Kevin Mansell said in a state­ment.

Kohl’s stock closed at $41.17, up nearly 1%.

Mall owner Mac­erich also re­cently has been feeling the heat.

In a Se­cu­ri­ties and Ex­change Com­mis­sion fil­ing Thurs­day, the Dan Loeb-run hedge fund Third Point said it pur­chased 1.73 mil­lion shares of Mac­erich. A re­port from Bloomberg cit­ing un­named sources said Third Point was ex­pected to act as an ac­tivist in­vestor and push for change.

Third Point de­clined to com­ment on the re­port.

Al Seib Los Angeles Times

THE PLAN by Macy’s to close its store at the West­side Pavil­ion mall is prob­a­bly re­lated to the re­cent open­ing of a new Macy’s at the nearby West­field Cen­tury City mall, which is com­plet­ing a $1-bil­lion makeover.

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