Macy’s 2020

[storewanderer]

Macy's Eagle Rock Plaza (Los Angeles, a former May Co.) is closing in September. There are two much nicer Macy's stores nearby, at the Glendale Galleria (former Broadway) and in Pasadena (former Bullock's.)

This store has not been one they've spent any money on and does not look good.

Closing stores like this are a positive for Macys image.

[ClownLoach]

You can imagine any number of futures for them, but it's unlikely that Dillard's is going anywhere. Dillard's hasn't entered a major market on its own since its entry into Atlanta, over 20 years ago.

What major markets has Macy's, JCP, or even Nordstrom (not Rack, but the standard Nordstrom) organically expanded into (not by way of merger) in the past 20 years? I think, virtually none.

What secondary markets has Macy's, JCP, or even Nordstrom (not Rack) organically expanded into (not by way of merger) in the past 20 years? Again I think that is going to be almost none.

But Dillard's is a little different. They have organically expanded into multiple new markets in the past 20 years with nice new stores. A lot of secondary markets but I believe they have built some new stores in growing cities in TX, GA, AZ, and UT that are larger markets.

Recently opened in Grand Junction, CO. Opening soon in Sioux Falls, SD. Also building a new store in Lubbock, TX (maybe this is a relocation).

Yes they have closed more stores than they've opened but that is no different from their competitors.

Dillard's has little to no debt and owns most of their real estate, and also owns the construction company that handles their capital projects. The business is boring and the family may not be trying to run any fireworks displays but I think as long as the business throws off cash they will keep letting it do what it does. And doing what it does means continuing to open a few new stores in new markets here and there in the future.

If Dillard's had been run financially like various regional department store chains (high debt, not owning real estate, sale-leaseback transactions, constant management changes, etc.), they would have gone out of business long ago. The whole reason Dillard's is able to operate today is due to having a very solid financial foundation from which it operates its business. They may not be the best retailer but they know how to keep their affairs in order to stay in business and throw cash back to the founding family.

Dillard's is very much run like Hobby Lobby except they buy real estate instead of leasing it. But both are zero debt companies, spend their own money on new stores instead of borrowing to open them, have their own general contractor to build the store out at minimal cost, and runs with the same consistent model changing minimally because it works for them. Hobby Lobby adds the aspect of shorter term leases and seeks out problematic properties like closed Kmart buildings that have sat rotting for some time so they can squeeze the landlord for a bargain, then they squeeze more by foregoing landlord construction contribution in exchange for even lower rent since they use their own people to build out the store. They get an escape valve at ten years max so if the store isn't productive enough, or they can find an even better deal elsewhere in town, they close the doors and walk away. Lots of Hobby Lobby stores in the Midwest that are open for ten years then move down the street or to the center across the street. The new store isn't necessary bigger or fancier (in fact they've been scaling down a bit with most relocations, trimming 20K or so), it's just cheaper and they can milk the same sales out of the box. Imagine with the current state of department store and mall facilities if Dillard had the same flexibility...

[storewanderer]

Dillard's is very much run like Hobby Lobby except they buy real estate instead of leasing it. But both are zero debt companies, spend their own money on new stores instead of borrowing to open them, have their own general contractor to build the store out at minimal cost, and runs with the same consistent model changing minimally because it works for them. Hobby Lobby adds the aspect of shorter term leases and seeks out problematic properties like closed Kmart buildings that have sat rotting for some time so they can squeeze the landlord for a bargain, then they squeeze more by foregoing landlord construction contribution in exchange for even lower rent since they use their own people to build out the store. They get an escape valve at ten years max so if the store isn't productive enough, or they can find an even better deal elsewhere in town, they close the doors and walk away. Lots of Hobby Lobby stores in the Midwest that are open for ten years then move down the street or to the center across the street. The new store isn't necessary bigger or fancier (in fact they've been scaling down a bit with most relocations, trimming 20K or so), it's just cheaper and they can milk the same sales out of the box. Imagine with the current state of department store and mall facilities if Dillard had the same flexibility...

Dillard's seems to put a lot of money into their store interiors on new stores from what I've seen. Their newer stores look a lot more "adorned" than most modern retail stores who have moved to a more white/gray simplistic look. The Grand Junction they opened recently has some gray down that really looks out of place given how the rest of the flooring, ceiling, etc. looks. Things like fitting rooms and restrooms are much higher quality than most retail stores with better fixtures, full stall doors that go down to the floor, etc. Their older stores look like old upper middle range department stores (that is not a compliment).

Hobby Lobby's older format in OK was often a 25k or 30k square foot slice of the 80's Wal Mart and it was far from nice. Their older stores show various remains of the previous retailer in the space. Newer stores do a very plain remodel but do remodel. I don't think making a nice looking store was ever part of their program. I have noticed Ross employs a similar real estate strategy of relocating stores when leases are up and makes stores smaller when they relocate. I've seen them do this now in Reno (Northtowne Lane- moved from store built for Ross into a slice of an old Wal Mart older building than theirs), in Carson City (moved from a store next to Target built for Ross into an awkward strip mall space next to Burlington which is a former Wal Mart). Also in the case of Ross the site they vacated in Reno is now a liquor store, and the Carson site is either vacant or a call center, so it wasn't that other "better than Ross" retailers were wanting the spots.

[ClownLoach]

Dillard's is very much run like Hobby Lobby except they buy real estate instead of leasing it. But both are zero debt companies, spend their own money on new stores instead of borrowing to open them, have their own general contractor to build the store out at minimal cost, and runs with the same consistent model changing minimally because it works for them. Hobby Lobby adds the aspect of shorter term leases and seeks out problematic properties like closed Kmart buildings that have sat rotting for some time so they can squeeze the landlord for a bargain, then they squeeze more by foregoing landlord construction contribution in exchange for even lower rent since they use their own people to build out the store. They get an escape valve at ten years max so if the store isn't productive enough, or they can find an even better deal elsewhere in town, they close the doors and walk away. Lots of Hobby Lobby stores in the Midwest that are open for ten years then move down the street or to the center across the street. The new store isn't necessary bigger or fancier (in fact they've been scaling down a bit with most relocations, trimming 20K or so), it's just cheaper and they can milk the same sales out of the box. Imagine with the current state of department store and mall facilities if Dillard had the same flexibility...

Dillard's seems to put a lot of money into their store interiors on new stores from what I've seen. Their newer stores look a lot more "adorned" than most modern retail stores who have moved to a more white/gray simplistic look. The Grand Junction they opened recently has some gray down that really looks out of place given how the rest of the flooring, ceiling, etc. looks. Things like fitting rooms and restrooms are much higher quality than most retail stores with better fixtures, full stall doors that go down to the floor, etc. Their older stores look like old upper middle range department stores (that is not a compliment).

Hobby Lobby's older format in OK was often a 25k or 30k square foot slice of the 80's Wal Mart and it was far from nice. Their older stores show various remains of the previous retailer in the space. Newer stores do a very plain remodel but do remodel. I don't think making a nice looking store was ever part of their program. I have noticed Ross employs a similar real estate strategy of relocating stores when leases are up and makes stores smaller when they relocate. I've seen them do this now in Reno (Northtowne Lane- moved from store built for Ross into a slice of an old Wal Mart older building than theirs), in Carson City (moved from a store next to Target built for Ross into an awkward strip mall space next to Burlington which is a former Wal Mart). Also in the case of Ross the site they vacated in Reno is now a liquor store, and the Carson site is either vacant or a call center, so it wasn't that other "better than Ross" retailers were wanting the spots.

Hobby Lobby intentionally builds a plain looking store, and they also mix up the layout in such a manner that the crafter will wind up having to walk through the majority of the store to find everything they need to complete their project. The lack of aisle signs, store directories, and so on is intentional along with a non-engagement service strategy. Most of the time aside from a cashier welcoming entering customers they will not engage the customer on the floor. They want them to wander around and find more product than they came in for. Their hope is that the customer who needs three items leaves with ten or more. Their customers spend twice as long in the store as their competitors (proven by Google which will show typical shop of 20-25 minutes at Michaels or Joann vs 45-50 at Hobby Lobby). Personally I am irritated by the lack of navigation and sometimes intentionally hidden product. Adhesives for example are needed for nearly every kind of craft and the aisle is always in a back aisle facing away from traffic so the customer has to hunt for it. I personally think this model is going to eventually send them to extinction. Their store is too hard to shop, and although I'm sure they love their high basket size there will be more and more baskets moving to Amazon and other more convenient shopping experiences.

[storewanderer]

Hobby Lobby intentionally builds a plain looking store, and they also mix up the layout in such a manner that the crafter will wind up having to walk through the majority of the store to find everything they need to complete their project. The lack of aisle signs, store directories, and so on is intentional along with a non-engagement service strategy. Most of the time aside from a cashier welcoming entering customers they will not engage the customer on the floor. They want them to wander around and find more product than they came in for. Their hope is that the customer who needs three items leaves with ten or more. Their customers spend twice as long in the store as their competitors (proven by Google which will show typical shop of 20-25 minutes at Michaels or Joann vs 45-50 at Hobby Lobby). Personally I am irritated by the lack of navigation and sometimes intentionally hidden product. Adhesives for example are needed for nearly every kind of craft and the aisle is always in a back aisle facing away from traffic so the customer has to hunt for it. I personally think this model is going to eventually send them to extinction. Their store is too hard to shop, and although I'm sure they love their high basket size there will be more and more baskets moving to Amazon and other more convenient shopping experiences.

Our Hobby Lobby is a giant former Service Merchandise (was a JCP Home/Furniture Store in the middle of that time) and they seem to use most of the space. The sales floor goes from the front wall to the back wall and the warehouse/framing/restroom spaces are all on the south portion of the building (this is consistent with JCP Home Store and Service Merchandise also). Right now they have a bunch of storage trailers around the building so I am not sure if this is their holiday inventory or they are doing some renovations (I haven't gone in).

I've never been greeted upon entering the store though.

I can never find anything in their store easily (the only place I have a harder time is Home Depot or Lowes where I just use the website/app before I shop to find an item location), but slowly I've learned there are sections completely irrelevant to me that take up significant space in their store (the front wall in one corner has fake flowers and in the other corner has seasonal). The middle of the store has glass "decor" type items (again irrelevant to me). So I've found most of what I buy there is on a patch of aisles toward the back center of the store. This is where paints, glues, scissors, etc. type items are.

The thing I notice about many of the customers shopping Hobby Lobby at least in my area is they don't seem to be in any hurry... they seem to have all day to meander around slowly, don't mind the slow checkout... what is even funnier is when they are shopping in groups and they separate, then have to spend 20-30 minutes walking around trying to find each other (hitting more impulse buys along the way of course). I notice a similar slow pace customer attitude over at JoAnn. The customer at Michaels seems less patient, like they have more intended stops that day.

[jamcool]

HL is designed for the type of shopper that is in the middle of the country, not NY/LA. That shopper is either elderly or has a large family, and shopping is a thing done for pleasure and looking for bargains and unique items. That is not your typical California shopper.

[storewanderer]

Back to the Macy's topic, I am getting the feeling Macy's is not doing very well lately.

I walked through the two Macy's units this weekend and while the stores looked pretty neat I couldn't help but notice how few customers and employees they had. Even the Backstage area was dead. The Toys R Us area keeps getting larger and is full of what look like a bunch of generic toys now; think the type of toys you see at drugstores during Christmas in big boxes that are very obviously generic and not even trying to look like a branded item.

I think JC Penney may have been busier (but had even fewer employees).

[buckguy]

Back to the Macy's topic, I am getting the feeling Macy's is not doing very well lately.

I walked through the two Macy's units this weekend and while the stores looked pretty neat I couldn't help but notice how few customers and employees they had. Even the Backstage area was dead. The Toys R Us area keeps getting larger and is full of what look like a bunch of generic toys now; think the type of toys you see at drugstores during Christmas in big boxes that are very obviously generic and not even trying to look like a branded item.

I think JC Penney may have been busier (but had even fewer employees).

I don't know why you have to resort to anecdote when the financials have been up for awhile and they are pretty abysmal:
https://www.cnbc.com/2023/06/01/macys-m ... -2023.html

Dillard did well during COVID, but they're doing almost as badly: https://finance.yahoo.com/news/dillard- ... 00174.html Macy has been able to cut inventories, but they're inching up at Dillard's, whose pre-COVID trend was clearly downward in terms of comparable sales and profits.

BTW, Macy's, Nordstrom, etc. don't need to expand geographically, because they're in virtually all the markets where they can plausibly compete. Dillard's is a regional, so it's lack of major market expansion is more notable. Macy's has been opening new stores, just not many of them. Their margins have dropped and they keep rebuying shares to pump up the dividend income to the Dillard family. My guess is that like Belk's, they'll eventually sell to private equity---if they can keep inflating the dividend, it might take a new generation of the family to do that. But owning a lot of depressed mall real estate probably doesn't help.

Forbes has a loopy take on Macy's, speculating that Target, among others, might want to buy them, which seems pretty unlikely: https://www.forbes.com/sites/walterloeb ... b2bff86125

[ClownLoach]

HL is designed for the type of shopper that is in the middle of the country, not NY/LA. That shopper is either elderly or has a large family, and shopping is a thing done for pleasure and looking for bargains and unique items. That is not your typical California shopper.

Actually, their #2 state is California now. The only place they have more stores is Texas. And their highest volume stores are all in Los Angeles county.

[rwsandiego]

...Forbes has a loopy take on Macy's, speculating that Target, among others, might want to buy them, which seems pretty unlikely: https://www.forbes.com/sites/walterloeb ... b2bff86125

Given Target sold the legacy department store business (Marshall Field's, which consisted of heritage Field's plus re-branded Dayton's and Hudson's) to May Company who, in turn, sold to Macy's I don't see Target buying the thing back. It seems like legacy department stores are a "been there, done that."

In other words, I agree with you @buckguy.