After decades of anchoring malls, Macy’s wants out

Macy’s is planning new smaller-format stores outside of malls.
Macy’s is planning new smaller-format stores outside of malls.
Image: Reuters/Mark Makela
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It’s not a good sign for US malls that their top occupant is considering a future elsewhere.

Macy’s will begin opening several smaller “off-mall” Macy’s and Bloomingdale’s stores over the next two years, CEO Jeff Gennette said during a call with analysts today. “We continue to believe that the best malls in the country will thrive,” he said. “However, we also know that Macy’s and Bloomingdale’s have high potential off-mall and in smaller formats.”

In February, Macy’s said it would close its underperforming stores in the weakest US malls and explore ways to expand beyond malls. The company has nearly 800 locations in the US, including its Macy’s and Bloomingdale’s department stores, beauty retailer Bluemercury, and its off-price outlets. Not all are in malls, but as of May, Macy’s was still the biggest tenant at US malls, according to a report that month by CoStar, a real-estate information firm.

Historically Macy’s has acted as an important anchor in US malls, making up a substantial share of their business by drawing shoppers and other retailers. Surrounding stores may even have co-tenancy clauses that let them renegotiate or break their leases if an anchor leaves. As more big department stores have closed, malls have had to seek out other tenants to take their places, such as gyms.

Because of the pandemic, the fate of many malls is even shakier than before. Retail bankruptcies are mounting and stores are closing, while shoppers may be unable or unwilling to return to crowded in-door spaces for some time still. Simon Property Group, the largest mall owner in the US, has reportedly held discussions with Amazon about turning some of its empty spaces into e-commerce fulfillment centers.

Macy’s isn’t abandoning malls. As Gennette noted, high-end malls filled with restaurants and activities have continued to attract shoppers over the years. But the company can’t rely on malls the way it used to, and many of those malls will no longer be able to count on Macy’s filling their large anchor spaces either.