Macy's needs to close 100 more stores, former retail exec says

Key Points
  • A handful of department stores report earnings Thursday and Friday, including Macy's, Kohl's and J.C. Penney.
  • One retail expert says these retailers aren't doing "enough" to grow their businesses as competition intensifies online.
  • Macy's, for example, should close 100 more of its stores to cut costs, Jan Kniffen tells CNBC.
Macy's quarter 'pretty ugly': Jan Kniffen
Macy's quarter 'pretty ugly': Jan Kniffen

Macy's latest earnings report was "pretty ugly," Jan Kniffen, a consultant to investors in retail companies and a former industry executive, told CNBC on Thursday.

"It sure as heck was not what we expected," Kniffen said during an interview on "Squawk Box."

Macy's reported earnings, revenue and same-store sales — a metric closely monitored for retail stocks by Wall Street — on Thursday that all missed estimates, sending its shares tumbling more than 10 percent.

Meanwhile, department store operators Kohl's and Dillard's, which also announced earnings Thursday before the bell, were pretty much "above plan" as far as what they reported, Kniffen said. "But everyone was tough on sales."

Looking ahead and considering the competitive retail landscape today, all the full-line department stores — Macy's, J.C. Penney, Nordstrom, etc. — need to shut down more of their brick-and-mortar locations, he said. "Nobody has come down [on store count] enough."

Macy's, for example, has announced plans to close 100 of its locations over the next few years, in an attempt to slim down its vast real estate portfolio and win more sales on online.

But, the market "probably wants to see another 100 Macy's stores close," Kniffen told CNBC.

"You just can't have 6, 7, 800 stores right now in America if you're a full-line department store retailer." Instead, these companies should focus on being a size where they can be "more efficient and more effective," he suggests.

Digital sales are becoming a more vital component to many retailers' businesses, as e-commerce giant Amazon presents tough competition for everyone in the industry.

"There's no way to fix that ... they compete with Amazon on those sales," Kniffen said. Stores like Kohl's and Penney's are going to see lower returns on online sales, as a result of Amazon's competitive force, for a "very long time," he added.

With a handful of major retailers reporting earnings Thursday, J.C. Penney is set to report first-quarter earnings before the bell on Friday.

Read: Macy's reports first-quarter earnings