Macy's Store Rationalization Sharpens Focus on Higher-Return Markets

Macy’s Inc. M continues to sharpen its strategic focus through a disciplined store rationalization program aimed at improving returns and strengthening long-term profitability. Under its Bold New Chapter strategy, the company is deliberately exiting underperforming locations while concentrating resources on markets and stores that demonstrate stronger customer engagement, higher productivity and more resilient demand patterns.

The impact of this strategy was evident in the third-quarter fiscal 2025 results. Total net sales declined modestly year over year, but management attributed the entire decline to store closures, noting that 64 non-go-forward stores closed last year, which contributed roughly $160 million in sales in the prior-year period. Excluding these closures, Macy’s sales grew approximately 2.9%, highlighting the strength of the remaining portfolio.

Performance at Go-Forward locations further reinforced the benefits of rationalization. Comparable sales for these stores increased about 2.3% during the quarter, outperforming the broader Macy’s nameplate. Within this group, the Reimagine 125 stores delivered a stronger 2.7% comp gain, underscoring how focused investments in higher-quality locations are driving superior returns and customer engagement.

Store rationalization has also supported expense efficiency. SG&A declined by roughly $40 million year over year in the quarter, aided by the benefits of closed locations and continued cost discipline. As a result, SG&A leverage improved by nearly 90 basis points, even as Macy’s continued to reinvest in its go-forward business.

Overall, Macy’s store rationalization strategy reflects a shift toward a leaner, more return-driven operating model. By concentrating on markets with stronger demand and higher productivity, the company is improving capital efficiency, enhancing profitability and positioning the business for more sustainable long-term growth.

KSS & COST Are Optimizing Stores for Growth vs. Macy’s

Store optimization is playing a pivotal role at Kohl’s Corporation KSS as it refreshes its physical retail environment to drive engagement and convenience in the third quarter of fiscal 2025. The company is refining store layouts, expanding impulse checkout zones and improving category adjacencies to encourage discovery and increase basket size.

By enhancing visual merchandising, signage and in-store inspiration, Kohl’s is creating a more intuitive and consistent shopping journey. These store-focused initiatives highlight a disciplined execution strategy that supports traffic recovery and positions Kohl’s for more sustainable long-term performance.

Costco Wholesale Corporation COST continues to enhance store productivity and member experience through targeted store initiatives. In the first quarter of fiscal 2026, the company opened eight new warehouses, taking its global count to 921, while also relocating high-volume locations to larger sites with improved parking and gas stations.

Costco is rolling out membership pre-scanning and digital wallet adoption, driving checkout speed improvements of up to 20% in early adopter warehouses. Additionally, selective remodels and expanded ancillary services are helping Costco accelerate sales productivity, with fiscal 2025 new warehouses generating ~$192 million in annualized sales per location.

Macy’s Price Performance, Valuation & Estimates

Shares of the company have surged 78.1% in the past six months compared with the industry’s 57.8% growth.

From a valuation standpoint, Macy’s is trading at a forward 12-month price-to-sales ratio of 0.27X, down from the industry average of 0.52X.

The Zacks Consensus Estimate for Macy’s fiscal 2025 earnings implies a year-over-year decline of 16.7%, whereas the same for fiscal 2026 indicates an uptick of 1.7%. Estimates for fiscal 2025 and 2026 have been revised upward by 13 cents and 10 cents, respectively, in the past seven days.

Macy’s currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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