What happened
Shares of department store chain Macy's (M 1.44%) are up 10.2% for the week as of mid-day Friday, mostly in response to reports of an expanded strategic partnership and an acceleration of a growth initiative unveiled more than two years ago.
So what
Macy's shoppers will see something distinctly new in all of its stores before the end of the year. On Monday, the company announced it is widening its existing partnership with WHP Global to open Toys "R" Us shops within every Macy's store by mid-October.The last stand-alone Toys "R" Us store was shuttered in early 2021, although Macy's has been leveraging the beloved brand since the latter part of last year with in-store shops in select locations.
Then, on Wednesday, Macy's announced it will be building four new stores this fall at sites other than traditional malls. The planned Market by Macy's as well as its Macy's Backstage stores are smaller stores than the chain's typical department store and are typically found at strip malls, or open-air malls. These locales are often more convenient to shop than sprawling indoor malls if for no other reason than they're frequently found nearer consumers' homes.
The news offered prospective buyers of a steeply sold-off Macy's stock something tangibly bullish to latch onto, so they did.
Now what
Although exciting, adding toys to all of its mall stores while continuing to expand the reach of Market by Macy's and Macy's Backstage isn't the game-changer Macy's needs.
Don't misunderstand me. Invoking a nostalgic name like Toys "R" Us and rethinking its footprint in a way that consumers increasingly prefer to shop are savvy ideas to be sure. With more than 700 stores -- most of which are still located at conventional malls -- Macy's still faces tremendous headwinds. UBS currently expects between 40,000 and 50,000 storefronts to close by 2026.At least dozens of them will be Macy's stores as part of a plan announced back in 2020 to shutter around 125 of its locations by 2023. At the time, that was roughly one-fifth of the company's stores, underscoring the depth of the challenge created by the advent of online shopping and consumers' changing shopping (and fashion) preferences.
Also bear in mind that as of Thursday of last week, Macy's shares were down nearly 40% for the year, leaving them ripe for bullishness in response to almost any headline.
This week's bullishness may well persist for a while longer. For true, long-term investors though, this company as well as the industry as a whole still has much to prove. Better opportunities are out there.
