Macy’s expands it strip-mall experiment in four cities in bid to refresh its brand and attract younger shoppers with smaller stores

Macy’s is expanding its small store format to the West and Northeast as it attempts to refresh its ailing retail brand and shift its footprint from cities to suburbs.

The department store chain said Tuesday it opened a strip mall location in Highland, Indiana, last month and plans to open small stores in Boston, Las Vegas and San Diego in the coming weeks.

That brings the total number of small stores to 12, about three years after the first strip mall location near Dallas opened.

The new stores range in size from 30,000 to 50,000 square feet, about one-fifth the size of regular department stores.

Macy’s said the four new stores will carry the iconic brand’s nameplate, while the other eight stores will still be called Market by Macy’s.

The department store opened its first small format store in the Dallas-Fort Worth area in 2020. Macy’s operates just over 500 stores under its namesake brand.

Nordstrom, Kohl’s, Macy’s luxury sister Bloomingdale’s, but also large stores such as Target, have been expanding to small formats for several years now.

But the trend gained momentum after the pandemic moved more stores to the suburbs and away from the cities.

Macy’s smaller department stores are not located in traditional malls, but rather in strip malls with discount stores.

They offer a slimmed-down range of trendy and basic fashion, as well as beauty products and fragrances, along with services that allow shoppers to pick up online orders at the store.

Macy’s noted that those small stores that opened more than one full fiscal year had positive comparable store sales, including licensed businesses.

The announcement came as the department store reported separately on Tuesday that it had to heavily mark down spring items to make room for fresh fall and holiday items amid cautious customer spending.

Overall, comparable store sales (those from stores and digital channels open at least a year) fell 7.3 percent in the quarter. Licensed companies, such as cosmetics, are also included in this figure.

Macy’s shares fell just over 14 percent during Tuesday’s session.

Macy’s also joined many other retailers in signaling the uncertainty over the end of the student loan moratorium, which had given one-time students a little more financial breathing room.

“As we plan for the rest of the year and think about 2024, we remain cautious about pressures impacting our customers, especially at Macy’s, where approximately 50% of identified customers have median household incomes of $75,000 or less, That’s what CEO Jeff Gennette told analysts on Tuesday during the company’s earnings call.

Gennette noted that in recent quarters he’s seen Macy’s customers pull back more aggressively on discretionary items and become more purposeful in their purchases.

The new stores range in size from 30,000 to 50,000 square feet, about one-fifth the size of mainstream department stores, such as the flagship Manhattan location seen above.

Macy’s was one of the last retailers to report second-quarter results in an earnings season that has shown how still-high inflation and higher interest rates are forcing shoppers to cut back on luxury items like clothing to pay for their higher grocery bills.

Target last week reported its first quarterly sales decline in six years, which was dragged along by cautious spending and some customer backlash on its Pride items.

Home Depot, the nation’s largest home improvement retailer, said last week that sales continue to fall, with a drop in high-priced items like appliances and other things that often require financing.

That’s become a problem as interest rates have risen rapidly over the past year, making credit cards a much bigger burden for consumers.

But Walmart posted another strong quarter-over-quarter revenue growth as low prices continue to attract budget-conscious consumers looking for deals in a tough economic climate.

The country’s largest retailer raised its full-year outlook last week after reporting better-than-expected second-quarter results.

Macy’s reported a loss of $22 million, or 8 cents per share, in the quarter ended July 29. That compares to earnings of $275 million, or 99 cents per share, in the year-ago period.