Macy's to close 11 underperforming stores

By Elizabeth Strott

The consumer slowdown has taken its toll on department store operator Macy's (M, news, msgs).

The Cincinnati company this morning said it will close 11 underperforming stores in nine states, affecting 960 employees.

"The decision to close stores is difficult, and often occurs when the market changes, new competing shopping centers are opened nearby to existing older ones, or when customers change shopping habits. In the store closing process, we are committed to treating affected associates with respect and openness," Chief Executive Officer Terry Lundgren said in a press release.

• Top Stocks: Macy's turns out the lights

The locations of stores affected:

• Ernst & Young Plaza (Citicorp Plaza), Los Angeles (135,000 square feet; 136 employees; opened in 1986).

• The Citadel, Colorado Springs, Colo. (195,000 square feet; 105 employees; opened in 1984).

• Westminster Mall, Westminster, Colo. (156,000 square feet; 110 employees; opened in 1986).

• Palm Beach Mall, West Palm Beach, Fla. (190,000 square feet; 71 employees; opened in 1979).

• Mauna Lani Bay Hotel, Island of Hawaii (3,000 square feet; three employees; opened in 1983).

• Lafayette Square, Indianapolis (160,000 square feet; 84 employees; opened in 1974).

• Brookdale Center, Brooklyn Center, Minn. (195,000 square feet; 72 employees; opened in 1966).

• Crestwood Mall, St. Louis (166,000 square feet; 176 employees; opened in 1969).

• Natrona Heights Plaza, Natrona Heights, Pa. (73,000 square feet; 124 employees; opened in 1956).

• Century III Furniture and Clearance, West Mifflin, Pa. (83,000 square feet; three employees; opened in 2000).

• Bellevue Center, Nashville, Tenn. (211,000 square feet; 76 employees; opened in 1990).

"These closings are part of our normal-course process to prune underperforming locations each year in order to maintain a healthy portfolio of stores," Lundgren said.

Shares of Macy's were down 23 cents, or 2%, to $11.08 at 1:45 p.m. ET.

Weak December for Macy's

The department store also said same-store sales fell 4% in December, slightly better than the 5.3% decline analysts had expected. But same-store sales fell 7.5% for the November-December holiday season, illustrating the difficulty Macy's and other retailers faced last year.

• Video: December chain-store sales

Macy's expects to earn between 90 cents and $1 per share for its fourth quarter ending Jan. 31, below the consensus estimate of $1.12.

For the full year, Macy's now expects to earn between $1.10 and $1.20 per share, down from earlier guidance of between $1.30 and $1.50 per share. Analysts are looking for $1.35 per share for the full year, ending Jan. 31.

An avalanche of bad news for retailers

As cost-conscious consumers sharpen their focus on necessities, department stores are struggling to find their niche.

Earlier this year, Macy's was struggling less than some of its rivals. The retailer had made strides in distinguishing itself through exclusive partnerships with big names such as FAO Schwarz toys and Martha Stewart's home collection.

Lundgren has expressed optimism about the "My Macy's" initiative, launched in February, which aims to implement a more localized approach that adapts to regional tastes of customers, some of whom rebelled at the way the company integrated the former May Department Stores, acquired in 2005 and rebranded as Macy's stores more than two years ago.

The $11 billion May merger made Macy's the nation's fourth-biggest mass merchandiser in terms of revenues. It has more than 800 department stores in 45 states under the Macy's and Bloomingdale's names. Macy's contributes about 90% of the company's revenues. In mid-2007, the corporate name was changed to Macy's from Federated Department Stores and the stock began trading under the ticker symbol "M" on the New York Stock Exchange.

Today's Macy's report is just part of an avalanche of bad news from the nation's retailers, including Wal-Mart Stores (WMT, news, msgs), the world's largest and the nation's biggest private employer.

The discount retailer, which had managed to avoid the impact of the recession over the past year, missed big on its December same-store sales numbers this morning.

Wal-Mart posted a 1.7% increase at sales at stores open at least one year, but analysts had been looking for a 2.8% gain. Wal-Mart had predicted that sales would rise between 1% and 3% last month.

Shares of Wal-Mart, a component of the Dow Jones Industrial Average ($INDU), were down $4.50, or 8.1%, to $51.04 at 1:45 p.m. ET.

Thomson Reuters said December overall same-store sales for a group of 35 retailers fell 0.9%, worse than the 0.5% gain seen in December 2007 but slightly better than the decline of 1% the research firm had expected. Still, last month was the second-weakest since Thomson Reuters started tracking the data in 2000. November's drop of 2.1% was the worst on record.

A retail watcher had more glum news for the sector: The International Council of Shopping Centers said December same-store sales fell 1.7%. Sales fell 2.2% in November and December, the worst two-month drop since 1970, when the council began tracking the data.

The Macy's announcement "does not bode well (for retailers) going into January-February, where we go into a lull period and there's really no reason (for consumers) to buy until spring," said Adrienne Tennant, an analyst at Friedman, Billings, Ramsey, during an appearance on Bloomberg Television this morning.