Earlier this year, Macy's announced plans to close 150 underperforming stores over three years, with a target of closing 50 stores by the end of 2024. As it reduces its storefront footprint, Macy's also released its fourth quarter earnings report, which showed a decline in revenue for the quarter. Closing stores is a common way to reduce costs.
However, Macy's is not simply closing stores to shrink its business. Such an approach is merely a short-term solution. While it reduces costs, it also lowers revenue. Therefore, Macy's plans to open new upscale department stores and luxury brand stores, gradually transitioning from large-scale department stores to high-end ones.
After conducting research, Jefferies found that TJX Companies is the most likely to fill the market void left by Macy's closures. This is firstly due to the substantial overlap in store locations between the two retailers, with consumers likely to choose a nearby alternative when one closes.
More importantly, Macy's and TJX share a significant overlap in their target audiences. Previously, consumers might have chosen between the two, but with the store closures, there's no need to choose. This point is crucial because if the target audiences were different, filling the market gap would be challenging. The consumption habits of low-income and high-income groups are distinct, and closing stores does not change these habits.
According to Jefferies, TJX is likely to be the biggest beneficiary of the Macy's store closures. TJX has always been a retail sector choice recommended by Jefferies.
