Macy's looks to redevelop Nicollet Mall location

Macy's is seeking partners to develop alternative uses for its historic department store in downtown Minneapolis, saying the location on Nicollet Mall is a flagship location for retail.

In a conference call with investors Wednesday, CEO Terry Lundgren said the company is seeking partners to overhaul its flagship stores in Manhattan, Chicago, San Francisco and Minneapolis.

"We are concentrating our resources on strengthening our top stores in our best locations," Lundgren said. "These locations have tremendous growth potential and we believe with greater focus we can improve their already-strong results."

In recent years Macy's stores have vanished from central business districts across the country. In 2013, the company packed up its mannequins and turned off the lights in downtown St. Paul, St. Louis and Houston. Pittsburgh's shut down last summer. And the company plans to close another 35 to 40 locations early next year.

Lundgren did not offer any details on what a Minneapolis overhaul would entail. But Macy's locations that avoided the ax in other downtowns may offer some clues.

In Portland, Ore., a Macy's shares a 15-story, century-old department store building with a luxury hotel. In Brooklyn, N.Y., the chain is redeveloping much of its down-at-the-heels nine-story building into rentable office space. A smaller Macy's will remain on four of those floors.

In Minneapolis, the building fronting a block on Nicollet Mall may soon undergo a similar transformation. For nearly a century it was the flagship of the Dayton's chain. It became Marshall Field's after a 2001 corporate restructuring, then Macy's four years later. In 2009, the company closed its division headquarters there, cut 950 jobs, and left a lot of empty office space.

"Whether it's an office use or a hotel use on those upper floors — one might even imagine housing as a possibility — I think it could be any or all of those things," said Steve Cramer, president of the Minneapolis Downtown Council. "And it's just a matter of what the right market-based solution is for Macy's and whoever they choose to partner with."

Like many other big store chains, Macy's has been struggling amid sluggish consumer spending and fierce online competition. It's latest quarterly earnings report was grim. Sales dropped more than 5.2 percent.

But Macy's is playing a good game of catch-up, says retail consultant Carol Spieckerman. Despite the costs of running physical stores, Spieckerman says traditional retailers have realized those locations are a big advantage.

"What's old is new again. Brick-and-mortar presence has actually never been more critical to retailers' digital strategies," she said.

Last year Macy's installed iBeacons in all of its stores. The technology lets customers receive coupons and other offers on their smartphones, which are pegged to their location within the store. Macy's has also signed more exclusive deals with particular clothing brands, which is good for both in-store and Internet sales.

"If you find that brand, and it fits, and it's a perfect fit, you can go online and order six more in different colors," Spieckerman said.

Physical stores — especially historic ones like the Nicollet Mall Macy's — are important for another reason, Spieckerman said. They put the retailer's name in front of a lot of shoppers, reinforcing the brand at a time when they have more choices than ever.