Dive Brief:
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Off-price retailers will get a bump from Macy’s' on-going plans to close some 100 stores, according to a note from BMO Capital Markets apparel and retail analyst John Morris. Burlington Coat Factory, which has 47 stores within five miles of a Macy’s slated for closure, will be a prime beneficiary, CNBC reports.
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Off-price stores run by Burlington, TJX Cos. and Ross could snap up 40% of the $575 million in revenue that those closures will leave on the table, Morris estimates.
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Burlington stores could garner a 15-cent bump to per share earnings, while TJX’s TJ Maxx, Marshall’s, Sierra Trading Post and Home Goods may see a one cent per share boost, and Ross may see a 7-cent boost, Morris said.
Dive Insight:
Burlington’s windfall in the wake of Macy’s closures stems from its smaller store base; its stores nearby closing Macy’s stores is about 8% of its U.S. footprint, while TJX’s 100 stores are less than 5% of its overall U.S. store base and Ross’s 65 nearby stores are also about 5% of its overall count, according to the report.
"The opportunity is most pronounced for Burlington, mainly based on the company's relative small size," Morris said in the note cited by CNBC. "But Burlington also benefits from its relatively large exposure to these particular malls.”
Macy’s itself has operated as an off-price retailer in a way because it has depended so heavily on discounts and ongoing sales to boost traffic, according to Columbia University retail studies professor Mark Cohen. “Macy’s occupies 700-plus stores, they’re in a, b and c malls throughout the country — that has always been a trap and now it’s hurting them,” Cohen told Retail Dive. “Macy’s has become a brand emporium, always on sale.”
The department store retailer first announced it would close 100 full-line stores by early 2017 in August, with the aim to target locations where the value of the real estate exceeds their value as retail stores. Business Insider has compiled an exhaustive list of where stores will close.
