Macy's could close stores, redevelop flagships

Macy's (NYSE:M) could close stores and take on tenants at flagship locations as the department store chain struggles to meet financial expectations ahead of the holiday season.

The retailer cut its full-year forecast and is entering the holiday season with unsold inventory, raising alarms that it could usher in a very promotional fourth quarter.

Comparable store sales at Macy's declined 3.6 percent, the third straight quarterly decline, and executives expect fourth quarter comparable store sales to fall 1.8 to 2.2 percent for the year.

Macy's CEO Terry Lundgren said the company could close more stores and redevelop some flagship locations, including its State Street property in Chicago's Loop, once the flagship for Marshall Fields.

Macy's is looking for ways to monetize its real estate, and would consider taking tenants in these buildings, in the form of joint venture or other deal structures, according to the Chicago Tribune.

"We are just beginning an exploration to see what else we can do with the underutilized space in the building beyond the store," said Macy's spokesperson Andrea Schwartz. "We have no pre-determinations at this point, except for the fact that this is a successful Macy's store that will remain at this location."

"We're seeking creative ways to strengthen our retail presence while monetizing or highlighting value of the less productive space," Karen Hoguet, Macy's CFO, said in a call with analysts.

The retailer did rule out creating an REIT. "We and our board concluded there was not enough value to be created from the establishment of a REIT at this time," Lundgren said on the call.

Lundgren declared "stores are the new black" in April at the University of Arizona's Global Retailing Conference in Tucson, Arizona. But the retailer has struggled to attract younger shoppers and last month debuted the One Below department in New York City, an experiment to attract millennials. Macy's also launched the off-price Backstage concept in September.

For more:
-See the Chicago Tribune story
-See the Reuters article
-Read this Macy's transcript at Seeking Alpha

Related stories:
Macy's brings LensCrafters in-store
Macy's appoints former Home Depot CEO to board
Macy's debuts One Below for millennials
Macy's Backstage announces two more pilot locations
Macy's Lundgren: Stores are the new black