Macy’s to sell former I. Magnin building at Union Square

The Macy's men's store (right) was sold in 2016. The Macy's men's store (right) was sold in 2016. Photo: Paul Chinn, The Chronicle Buy photo Photo: Paul Chinn, The Chronicle Image 1 of / 10 Caption Close Macy’s to sell former I. Magnin building at Union Square 1 / 10 Back to Gallery

Macy’s is downsizing its physical presence in San Francisco once more.

The company will explore opportunities to sell the former I. Magnin building, approximately 240,000 square feet of retail space, from its flagship store in San Francisco’s Union Square. It will also convert the remaining street-level space into shops leased out to third-party sellers, the company said Monday.

The announced sale falls in line with previous moves to reduce the brand’s brick-and-mortar presence and comes ahead of its fourth-quarter earnings call scheduled for Tuesday.

Macy’s earlier announced that it will shutter its store in the Stonestown Galleria in March. That space was sold to General Growth Properties in January 2017, which plans to repurpose the square footage into a mix of smaller retail stores, restaurants and a multiplex movie theater.

The company also sold its stand-alone men’s store in August 2016 and said it would fold the men’s business into the main store.

Doug Stephens, founder of Retail Prophet, said that much of the value department stores still hold lies in their real estate holdings. Selling and leasing property is an effort to capitalize on that, Stephens said, but it remains an unsustainable strategy.

Stephens said that while off-loading space would bring in money, a reduced physical presence creates a diminished brand in the minds of consumers.

“Increasing online sales and diminishing physical presence are two competing forces,” Stephens said. “They feed each other, and you have to be careful not to cut your brand too close to the bone.”

Currently, the Macy’s Union Square store is composed of multiple buildings that have been developed into one store. The pending sale of the former I. Magnin building, at Stockton and Geary streets, would still leave Macy’s with approximately 700,000 square feet of retail space at Union Square.

Department stores have announced a wave of closures as online sellers like Amazon continue to expand their offerings and provide shorter delivery windows.

In 2016, Macy’s announced a multiyear plan to close 100 stores, 68 of which shuttered in 2017. In addition to the Stonestown Galleria store, Macy’s will close its Novato Furniture Store in March.

As department stores struggle, their workforces do also. Last year, an estimated 3,900 Macy’s employees lost their jobs due to store closures. Joy Deinla, a spokeswoman for Macy’s, said that employees were notified of the downsizing Monday.