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It’s no secret that Macy’s Inc. (NYSE:MB) has struggled to compete with online retailers like Amazon.com Inc. (NASDAQ:AMZNC) and discounters such as The TJX Cos. (NYSE:TJXB), aka T.J. Maxx.

Now that the company says it plans to close 100 more stores (14% of its total), in an attempt to turn business around after 6 negative sales quarters, even more attention is falling on the venerable old-line department store chain.


Shares Jump On Announcement

The announced store closings, along with a better than expected sales report for Q2, helped Macy's stock soar 17% Thursday, closing at $39.83.

Despite the boost in share prices, sales fell 3.9% in Q2 to $5.9 billion. Analysts had anticipated sales of just $5.8 billion, providing further impetus for the jump.

In addition, the company beat earnings estimates of $0.48 per share, posting a gain of $0.54 per share instead. This plus to plan to run a tighter, leaner ship apparently inspired investors to buy the stock at higher prices.

Consumer Spending And Activist Pressure

It isn’t just competition from online and discount retailers that is hurting Macy’s. When they do spend, consumers tend to buy big-ticket items like cars and electronics instead of clothing.

Additional pressure has come from activist investor Starboard Value LP, which wants Macy’s to unlock value on its real estate holdings. This includes pressure to unload the Herald Square store in New York and the Men’s Store in San Francisco.


As Goes Macy’s So Go Suppliers

Closing stores means fewer places to sell merchandise manufactured by Macy’s suppliers. One or more of these top companies could feel the effect of Macy’s shrinking footprint.

Ralph Lauren Corp. (NYSE:RLB), for example, counts Macy’s as its top customer since nearly 11% of Ralph Lauren’s Polo brand sales go to the department store retailer. There is speculation the Coach Inc. COH decision to close about 25% of its North American department store locations may have been influenced by Macy’s store closing decision.

Accessory maker, Fossil Group Inc. (NASDAQ:FOSLC) has seen sales plunge 11% in its second quarter, in large part due to lackluster demand for its products in Macy’s stores. Those announced store closings will only make things worse.

Others, including Nike Inc. (NYSE:NKEC), Movado Group Inc. (NYSE:MOVC), which sells its own brand plus Coach and Tommy Hilfiger watches and V.F. Corp. (NYSE:VFCC), distributer of Timberland, North Face, Wrangler and Lee do not disclose the percentage of sales attributable to Macy’s. Those names, however, are familiar to Macy’s customers and the loss of floor space will obviously have an impact on total sales.

Finally, PVH Corp. (NYSE:PVHB), which owns Tommy Hilfiger, is Macy's biggest menswear vendor. The company’s agreement with Macy’s expires in 2017, sparking speculation it might want to look elsewhere for future contract agreements.

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