Axios Closer

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February 27, 2024

Tuesday ✅.

Today's newsletter is 674 words, a 2½-minute read.

🔔 The dashboard: The S&P 500 closed up 0.2%.

  • Biggest gainer? Norwegian Cruise Line (+19.8%), the cruise ship operator, delivered stronger-than-expected first-quarter earnings guidance.
  • Biggest decliner? International Flavors & Fragrances (-3.8%) had another volatile session, its latest since disappointing investors with Q4 results and a dividend cut last week.

1 big thing: Macy's shrinks

Illustration: Sarah Grillo/Axios

Macy's will continue to get smaller, announcing another round of store closures in the face of declining sales and activist investors who want the company to sell itself.

Why it matters: The closures are part of a larger plan for new CEO Tony Spring — a first step in his attempted makeover of Macy's after taking the reins less than a month ago, Nathan writes with Axios' Kelly Tyko.

Between the lines: The retailer said today it will close another 150 stores by the end of 2026, which would leave it with fewer than half of the full-size Macy's department stores that it had a decade ago.

  • But while the company is closing some stores, it's opening others — at least 30 new Bluemercury stores and 15 new Bloomingdale's locations over the next three years as it seeks to ramp up its luxury game.
  • The company has also introduced new smaller format stores and off-mall locations in recent years and has plans to grow these formats.

What they're saying: "A smaller footprint will allow management to direct capital and attention to its best performing assets," Fitch Ratings senior director David Silverman said in a statement.

  • Case in point: The stores slated to close represent a quarter of the gross square footage for Macy's Inc., but they account for less than 10% of sales, Spring said during a call with analysts today.

Reality check: The retailer's sales in the last fiscal year were down 8% from 2017, a period during which U.S. spending on apparel, home and beauty products rose 33.5%, according to GlobalData retail analysts.

  • The department store sector has been reeling for years, struggling to compete with nimbler big-box chains, fast-fashion retailers and digital competitors.

What we're watching: Macy's new plan has the full support of its board, the same board its activist investors are seeking to replace.

Full story

2. Bonus chart: Shrinking footprint

Data: Macy's corporate documents; Chart: Axios Visuals

In early 2020, before the pandemic, Macy's said it would close around 125 stores over three years, which at the time was a fifth of its locations, Kelly writes.

  • It fell short of its target and closed 80 namesake stores. It's currently closing another five stores before today's announced closing round begins.

3. What's happening

ğŸŽ Apple is reportedly canceling its not-so-secret project to build an electric car. (Axios)

ğŸŽ® Sony is laying off 900 workers in its PlayStation division. (CNBC)

💊 Viking Therapeutics' stock doubled after it revealed positive results in a clinical trial for a new weight-loss drug. (MarketWatch)

4. Learnings from earnings: Smucker, Lowe's, Cava

Illustration: Natalie Peeples/Axios

Here are Nathan's takeaways from several key earnings reports:

🧑‍🍳 J.M. Smucker: The packaged food giant didn't rely as much on price increases in its most recent period. Comparable sales rose 6% — two-thirds of which came from volume increases, while only one-third came from price hikes.

🔨 Lowe's: The home improvement retailer posted a comparable sales decline of 6.2% — 2.7 points worse than rival Home Depot. The company is experiencing what it called "a slowdown in DIY demand."

🥗 Cava: The Mediterranean fast-casual chain saw increased guest traffic fuel same-store sales growth of 11.4% in Q4. Its stock soared today after the company published results a day early.

5. Year of the hybrid

The 2024 Toyota RAV4 Prime. Photo: Toyota

Toyota's strategy of prioritizing hybrids over EVs continues to pay off as the automaker placed four vehicles on Consumer Reports' list of top 10 buys for 2024, Nathan writes.

Why it matters: CR's annual list of top picks is an influential guide for car shoppers.

State of play: Of the top 10, four were hybrids and three were plug-in hybrids.

  • Only one was a pure EV — and that came in the EV category.

Here's the full list of CR Top Picks:

  • Subaru Crosstrek, Subaru Forester, Toyota Highlander Hybrid, BMW X5/X5 PHEV, Ford Maverick/Maverick Hybrid, Toyota RAV4 Prime plug-in hybrid, Tesla Model Y, Mazda3, Toyota Camry Hybrid, and Toyota Prius/Prius Prime plug-in hybrid.

6. What they're saying

"Consumers see surge pricing that is based on time ... as an unfair practice and feel anger and resentment towards a brand that engages in surge pricing."
— Farnoush Reshadi, assistant professor of marketing at Worcester Polytechnic Institute, on Wendy's plan to test variable pricing.

Today's newsletter was edited by Pete Gannon and copy edited by Sheryl Miller.

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