Macy’s expands Market by Macy’s, Bloomie’s off-mall stores

FAIRFAX, Va. — Shoppers browse racks of clothing with a glass of wine in hand. A display of pet accessories and a water bowl greet four-legged visitors. Couples push strollers through a store on a neighborhood walk.

It’s not a local boutique. It’s Bloomie’s, a new store from Macy’s.

The department-store operator is thinking smaller and outside of the mall with its latest stores as it shutters more of its giant mall anchors. Macy’s has opened 10 locations in strip centers — mini-versions of its namesake stores and Bloomingdale’s — and plans to add five more this fiscal year. The shops, called Market by Macy’s and Bloomie’s, are about one-fifth of the size of the retailer’s typical Macy’s and Bloomingdale’s stores.

It has not announced the locations of the four Market by Macy’s stores, but said the additional Bloomie’s store will be in Seattle.

Macy’s off-mall expansion is part of its answer to investors who think of department stores as dusty and dull. The company is chasing customers in bustling shopping centers and fast-growing suburbs as it exits dying malls. Inside these new and smaller stores, it’s offering a slimmed-down assortment of popular brands with displays that rotate frequently to stay fresh and on-trend.

This year will offer a pivotal test for the strategy, CEO Jeff Gennette said in a CNBC interview. The retailer will wrap up the test-and-learn phase of the stores and decide on expansion plans by year-end, he said.

“The hope is that we’re going to have a model that we’re going to be able to scale more aggressively in 2024 and beyond,” Gennette said in a call in March. “We’re very bullish on the concept. We’re very bullish on the early learnings. The size, the locations are all working.”

Early returns suggest a strong start for the strategy: Sales at the off-mall stores have outperformed the rest of the company. At Market by Macy’s and Bloomie’s, comparable sales at the stores open over a year grew 8% and 12% in the holiday quarter, respectively, including licensed departments. That compares with a decline of 3.3% at Macy’s and feeble growth of 0.6% at Bloomingdale’s during the same three-month period, including licensed departments and online sales.

Off-mall stores also have drawn younger and more diverse customers, including some who are new to Macy’s, according to company leaders. Still, it is too soon to know if the experiment will pay off. Most of Macy’s roughly 700 store locations are still in enclosed malls. By opening the strip-mall shops, the retailer could steal business away from its larger namesake mall stores.

As Macy’s expands the concepts, the smaller locations could run into the same struggles its legacy stores are facing.

Simeon Siegel, a retail analyst for BMO Capital Markets, said department stores…