One of the main headlines late this week is the announcement of Macy's (NYSE: M) closing 100 of its stores by early next year. This comes after the most recent earnings announcement showed yet another quarter with declining sales. Now, in Macy's case this news is highlighted due to the fact that the previous 5 quarters all showed declines in sales.
Analysts are having a field day with why Macy's continues to struggle, but most of us understand that there is a simple, one word answer... Amazon.
The company's CFO continues to tout the need for physical space as the single competitive advantage that Macy's has over Amazon (NASDAQ: AMZN) . If this were true then you would hear Amazon saying, "If only we had very large spaces all over the country that consumers could shop at, then we would be a real company." But, the CFO pushes on:
"And let's not forget the critical importance of stores for most of our vendors. We have the ability of showing merchandise and providing instantaneous not only purchasing, but also the ability to put outfits together in a store, which, again for many customers, to be able to see the color, feel the fabric, see how it fits, it's still where the lion's share of where this merchandise is being sold."
Maybe she has a point. The numbers show that almost 90% of all "retail sales" are still happening in retail stores. Amazon is no stranger to the storefront either, so analysts continue to argue over the idea that physical retail will ever disappear 100%.
One thing is sure, Amazon feels they can digitize the fashion-apparel space. Macy's has always been the dominant leader in this space, but Amazon continues to gain market share. Amazon recently announced their own clothing brands along with a 100% increase in their fashion offerings.
As for the performance of Macy's shares. Investors seem to like the idea of a leaner, meaner Macy's though. Shares shot up over 17% Thursday on the news, closing at a 3 month high on well above average volume.