Macy’s Inc. is closing its Pittsburgh flagship and selling the 1.2 million-square-foot property for redevelopment, as part of an ongoing strategy to re-examine old downtown locations across the country, address changing demographics, and cash in on or seek alternative uses for unproductive or unused space.
This story first appeared in the July 14, 2015 issue of WWD. Subscribe Today.
Macy’s is also examining empty upper floors in Seattle and Minneapolis stores, among other locations, and considering alternatives for the downtown Brooklyn flagship. One possibility is that the Brooklyn site gets renovated to a new, compact urban format. The Brooklyn site, at 422 Fulton Street, was formerly the flagship for Abraham & Straus. It was converted to Macy’s in 1995.
Macy’s had no comment on the Brooklyn location. “We are always reviewing our real estate portfolio,” said Jim Sluzewski, Macy’s senior vice president of corporate communications and external affairs.
Over the last several seasons, the upper floors of the Portland, Ore., store became a hotel, and in Philadelphia, the upper floors of the downtown store became offices for other companies.
In another sign that the $28 billion retailer is rethinking its space, Macy’s is launching its first six off-price stores this fall, which will be called Macy’s Backstage. The one in the Essex Green Shopping Center in West Orange, N.J., is being created out of an existing Macy’s unit.
This year, Macy’s is under increased pressure with total sales declining 0.7 percent in the first quarter, and comparable-store sales dipping 0.1 percent. For all of last year, total sales rose 0.6 percent and comparable sales were up 1.4 percent.
Sources also have said Macy’s is cooking up a specialty store prototype, to attract younger customers, including Millennials and the college crowd, in secondary markets around the country such as Savannah, Ga., and Chattanooga, Tenn. The stores could be in lifestyle centers and near university campuses. WWD has also learned that in a major piece of the ongoing Herald Square flagship renovation, the basement will be transformed to target Millennials.
The Pittsburgh department store, at 400 Fifth Avenue, is being sold to Core Realty, which is planning a major mixed-use redevelopment of the site. “For the past four years, Macy’s has been investigating the best possible use for this property, especially given the large amount of unproductive and unused space on the upper floors. We have talked with a wide variety of partners in pursuit of a plan that would create the most value for our company and the community,” said Jeff Kantor, Macy’s chief stores officer. “In late 2014, we began working with Core Realty, which had an exciting vision for residential, hotel and parking on the upper floors and annex building. More recently, we decided to make the entire building available to Core so it could evolve its plans into a more holistic project. We believe this will be an outstanding addition to the downtown Pittsburgh community in an important location in the heart of the city.”
A final clearance sale in the Pittsburgh store will begin July 20 and is expected to run until early September. Kanter noted that while Macy’s will no longer operate a downtown Pittsburgh store, it continues to operate 13 stores in southwestern Pennsylvania.
Of the 1.2 million square feet of space on the 13-floor Pittsburgh store, about 475,000 square feet is selling space. It was opened in 1887 as a Kaufmann’s store and Macy’s took it over and renamed it in 2006.
Many of the 170 employees will be offered jobs at other stores in the area, or will receive severance. In addition, about 30 Macy’s associates who work in district offices on the 11th floor of the Pittsburgh building will be relocated to space in another Macy’s store in the Pittsburgh area.
With 800 Macy locations domestically, there’s little room left in the U.S. to open additional department stores. The corporation, which also includes the 37-unit Bloomingdale’s chain, expects total sales to grow just 1 percent and comparable sales to gain 2 percent in 2015, including digital sales. Last year, sales rose 0.6 percent to $28.1 billion from $27.9 billion, and comparable sales rose 1.4 percent.
As of January , Macy’s Inc. had 823 stores including 447 that are owned, 267 leased and 109 operated under arrangements where the company owns the building and leases the land, according to the company’s 10K for 2014. All owned properties are held free and clear of mortgages, the record indicates. In some locations, Macy’s is obligated to operate stores for up to 20 years. The 823 stores represent 147.4 million square feet.