While many retailers have been forced to close stores in the course of the coronavirus pandemic, Macy's (NYSE: M) was planning on closures well before the COVID-19 outbreak began. In early 2020, it announced plans to close 125 locations over the course of three years. And now, it's making good on that promise, shuttering 45 locations by the middle of 2021.
It's a move that should not come as a shock to mall operators. Macy's has been saying for quite some time that it was looking to close its less profitable locations and focus more resources on digital orders. At the same time, Macy's is pursuing an off-mall strategy, opening stand-alone locations in strategic corners of the country.
Losing Macy's stores is, of course, a blow to malls. As of mid-2020, Macy's was malls' single biggest retail tenant, and losing this massive retailer means losing a well-known anchor store that's historically drawn in customers.
Still, malls aren't totally out of luck, and if they're willing to get creative, they may find they're able to fill the void left by Macy's with relative ease.
Who's going to replace Macy's?
Given the way department stores have been dropping like flies in the wake of the pandemic, it's silly to think that another major retailer will manage to come in and take the place of Macy's once its mall locations start shutting down. But mall operators can, and should, look outside retail to fill the large, empty spaces Macy's will inevitably leave in its dust.
Medical offices are one viable route to take. The coronavirus pandemic has only highlighted the need for convenient, accessible medical care, and there's perhaps no better way to satisfy that need than to bring doctors' offices and clinics to malls. Malls tend to have ample parking and are frequently located right off major roads and highways. In cities, malls can generally be accessed by public transportation. Doctors' offices, by contrast, can be harder to reach, so turning old Macy's stores into mini-medical centers is a great way for malls to generate revenue while drawing people into their facilities.
Another post-coronavirus option for malls to think about is entertainment beyond existing mainstays like movie theaters. Indoor amusement parks or arcades, for example, could potentially occupy old Macy's stores, attracting folks looking for a night out -- and motivating them to do some shopping while they're at it.
The Millionacres bottom line
Of course, it's hard to sugarcoat the loss of Macy's, and many malls will inevitably struggle in its absence. But those that can get creative are more likely to survive that blow, especially since Macy's probably isn't the only department store that will shutter locations in the near term. J.C. Penney (OTCM: JCPNQ), for example, is barely hanging on despite having been bailed out of bankruptcy by two major mall operators. Malls (and their commercial landlords) will have to get on board with the idea of replacing department stores with nonretail tenants if they want to survive for the long haul.