The logic of 21st century retailing goes that fewer is more.
The latest retail giant to hope that shrinking will lead to bigger profits is Macy's. On Thursday, it announced it will close 100 of its full-line department stores next year. It hasn't yet said which Macy's will close but said profitability at most of the targeted stores has been "declining steadily in recent years." And even though the retailer saw second-quarter sales and profits fall from a year ago, its stock price jumped on the prospect of fewer stores leading to higher profits in the future.
Gap, Sears, Staples and Wal-Mart are among the retailers that have previously announced store closings. They also are among the store operators scheduled to release their latest quarterly results in the week ahead. It's too early to see any significant financial impact of fewer stores, but long-term investors should listen for indications that the strategy of going smaller for bigger profits is working out.
The retail reduction knows no bounds. It has cut across traditional categories. Sports Authority is no more. Coach is closing a quarter of its stores. And the oldest Sears, open for 90 years on Chicago's North Side, is set to close this month.
It's been a mixed year for retail stock shareholders. The biggest and best performing retail stock in the Standard & Poor's 500 index is Amazon.com. While its margins put it in line with traditional brick-and-mortar retailers, it need not worry about the performance of profit-pinching storefronts.
