Macy's Store Closings Provides Opportunities For Burlington Coat Factory

By Christine Kern, contributing writer

Off-price retailers will benefit from revenues that store closures leave behind.

Off-price retailers will get a bump from Macy’s' closure of some 100 stores, according to a note from BMO Capital Markets apparel and retail analyst John Morris. CNBC reports that Burlington Coat Factory, which has 47 stores within five miles of a Macy’s slated for closure will be a prime beneficiary of these closings. According to CNBC, Morris predicts that off-price stores run by Burlington, TJX Cos. and Ross could take advantage of as much as 40 percent of the $575 million in revenue that those closures will leave on the table.

The Macy’s store closings followed a drop in same-store sales for November and December of 2.1 percent year-over-year, and CEO Terry Lundgren says he anticipates 2017 sales will continue to decline in a similar fashion, as Innovative Retail Technologies reported.

Major department stores have been struggling to find their place with customers, and  even as a number of major retailers are shuttering physical stores to focus on their online presence, other e-retailers like Amazon are experimenting with physical stores and fulfillment centers, as Innovative Retail Technologies has reported. In fact, the changing retail landscape has many lenders leery about the future of retail malls at all.

 But these changes could mean big gains for off-price retailers and big box stores, who are waiting to pick up the slack left behind when major retailers shutter their stores. Morris says that 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.

"The opportunity is most pronounced for Burlington, mainly based on the company's relative small size," Morris said. "But Burlington also benefits from its relatively large exposure to these particular malls."

A recent analysis by Credit Suisse estimated that off-price retailers increased their market share by 24 percent in 2015, rising from 17 percent in 2007. This is while department stores’ share dropped 10 percentage points to 35 percent.

And CMO also predicts that Macy’s closures, half of which are located in low-productivity malls, could precipitate mall closures following an anchor store leaving, which would provide even greater opportunity for off-brand stores in the vicinity to pick up revenue.