Thursday, April 13, 2006

Could Macy's pullout from New Orleans be a symbol of something bigger?

According to the AP , the Macy's store in downtown New Orleans will not reopen, and the reopening of the store at The Esplanade mall has been pushed back to possibly 2008, pending a "total redesign."

From what I've heard , the New Orleans Centre Macy's was not profitable in the first place, so its closing doesn't come as much of a surprise. But the suburban store being closed indefinitely got me to thinking. Is Macy's serious about this national branding plan they have repeatedly touted?

It would make sense symbolically to premiere this new strategy in an area that's under intense media coverage like New Orleans in an upscale mall like The Esplanade, even if it meant speeding up the construction schedule a bit. But instead they keep delaying it, and seem likely to just close the store, thereby leaving the southern Louisiana market, save for a couple of stores towards Baton Rouge.

If New Orleans is on the hot seat as far as Macy's is concerned, what does this bode for the smaller markets? Even with New Orleans being a less than affluent city overall, the market is still large and rich enough that Saks Fifth Avenue and Dillard's are rebuilding. Could this be the start of the elimination of Macy's stores in less-affluent markets? Or is this just an isolated incident that doesn't need analysis.


  1. I think New Orleans, in its hurricane-ravaged state, is an exceptional market. Federated isn't sure about its future prospects there, and for good reason. However, I do believe Federated will pull out of less-affluent markets nationwide in the coming years. Closing all those stores now would unleash too much carnage (layoffs and empty real estate), so Federated is going to do it slowly.

    To move this to a micro level, I offer some examples.

    Macy's pulled out of Baldwin Hills Crenshaw Plaza in South L.A. several years ago. Soon it will take over the Robinsons-May there. I don't think Macy's will keep its "new" location for long if it deemed the market "unworthy" several years ago.

    Macy's pulled out of Metrocenter in Phoenix last year. Again, it will soon take over the Robinsons-May there. Having abanonded that market less than 18 months ago, I don't think Federated is inclined to give it a "second try."

    Although greater Phoenix is quite affluent, Federated was always less aggressive than May. Since Macy's absorbed The Broadway, only one new store has opened in greater Phoenix. Macy's wasn't an anchor in any of the new malls being planned for the area. For some reason, Federated has been just as cautious in Phoenix as it has in New Orleans.

    Robinsons-May was planning 2 new stores in 2 new malls in Phoenix. Macy's has put off the opening of these stores "indefinitely" as well. What is going on? Now that it's absorbed Robinsons-May, Macy's has one less competitor in Phoenix! Of course, Dillard's has dominated the market for quite some time.

    Macy's may be the "national" brand, but Federated does not appear to be very "bullish" on many national markets. A lot of May's "marginal" stores won't last very long, especially those in smaller cities. New Orleans may never have a Macy's, and I think that's just fine by Federated.

  2. I agree with your analysis, and I have a feeling it's a consensus opinion among the retail heads I know. Daniel at remebering_retail was saying ome of the same things.