Macy’s announced Tuesday that it will significantly rethink its strategy and retail footprint, closing about 150 Macy’s stores over the next three years while expanding its upscale Bloomingdale’s and Bluemercury chains.
The moves put the company’s new Chief Executive Tony Spring’s stamp on efforts to improve the profitability of the largest department store operator in the United States and stave off a potential takeover bid.
This is the Macy’s chain’s second major reduction since 2020 and will leave the company with 350 stores, just over half the number it had before the pandemic.
Macy’s called the stores it planned to close “underproductive locations” that accounted for 25 percent of the company’s total square footage but only 10 percent of sales. The company said it hopes to earn between $600 million and $750 million by selling those stores and streamlining some of its warehouses.
“We need to focus on the best stores, not the most stores,” Mr. Spring said on a call with analysts Tuesday.
The company said it would begin notifying workers later in the day at stores it planned to close. It plans to close about 50 stores this fiscal year and the rest by the end of 2026.
Macy’s did not identify the locations, but one is the San Francisco store in Union Square, Mayor London Breed’s office said. The store, a staple of the shopping district for generations, will remain open next year as Macy’s seeks a new owner for the property, the mayor’s office said.
As Macy’s shrinks its retail footprint, Bloomingdale’s is expected to open 15 locations. Bluemercury, the company’s beauty chain, will add 30 stores and renovate others. As of November, there were 58 Bloomingdale’s and 158 Bluemercury locations.
“There’s less competition there, but the problem is it’s not clear whether luxury department stores really have a big future,” said David Swartz, a retail analyst at the financial services company Morningstar. “Many luxury brands do their own direct sales. »
Online sales at Bloomingdale’s give the company confidence that adding stores will boost digital sales in surrounding areas. About 80% of Bloomingdale’s digital sales are made in markets where Bloomingdale’s has physical stores.
The company will open its smaller-format Bloomingdale’s stores — known as Bloomie’s — and outlet stores over the next three years, Mr. Spring said on the call. In recent years, the company has opened smaller stores in strip malls, rather than enclosed malls, which have lost shoppers. “That’s where the whole market is heading,” Mr. Swartz said.
“It makes sense for Macy’s to open stores in these small communities, but is it too late?” he said. “Other companies are already doing the same thing.”
The decision to shrink the mid-market Macy’s chain while increasing the presence of luxury chains is a sign that Mr. Spring wants to reposition the company’s overall image so that consumers see it as an upscale destination. But, he added, that doesn’t necessarily mean the company’s stores will become a more expensive place to shop.
“I don’t believe that taste and style should cost more; I don’t think it should be just for the rich,” Mr. Spring said in an interview Tuesday. “I think we need to do a better job in our content, in our presentation and in our marketing, so that the customer sees and is inspired by what we are selling.”
Customer research showed that people wanted a better shopping experience at Macy’s, the company said, whether with improved visual merchandising or increased help from store employees. Selling some of its assets could help secure such improvements, including revamping the merchandise assortment and adding more staff in areas such as the shoe and women’s ready-to-wear departments.
Macy’s will increase the number of employees in some of its stores, using data to determine appropriate staffing levels and training employees on how to recommend products to shoppers and better assist them in fitting rooms .
Mr. Spring, who spent four decades at Bloomingdale’s, took the reins of the company at a difficult time. In December, a group of investors submitted a bid to take Macy’s private for $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, said that unless the retailer began sharing non-public information with them, they could take their offer to shareholders.
Activists have since named nine people to Macy’s board of directors. The company said in a statement last week that the activists did not provide funding details and instead opted to launch the proxy contest. On Tuesday, Mr. Spring told analysts that Macy’s board was evaluating the candidates, but asked that their questions related only to the retailer’s financial results and the announced three-year strategy.
A representative for the investor groups did not respond to a request for comment Tuesday.
After an initial increase in sales due to consumers spending on all kinds of items at the start of the pandemic, Macy’s experienced a decline in sales.
On Tuesday, the company also reported its results for the fourth quarter, which included the holiday shopping period. Net sales of $8.1 billion were in line with analysts’ estimates. Sales at Macy’s and Bloomingdale’s declined from a year earlier, while sales at Bluemercury rose 2.3%, a sign that shoppers continue to shift to the beauty and skin care categories.
The company said it would incur a $1 billion charge related to restructuring and store closures. By the end of the session, shares were up nearly 3.4 percent.
Sales have fallen as Macy’s has struggled to capture the next generation of shoppers and compete in a world increasingly geared toward e-commerce.
“Macy’s just didn’t do its best for the consumer, so consumers abandoned it and shopped elsewhere,” said Neil Saunders, chief executive of research firm GlobalData. “It’s a bit of a turning point for Macy’s.”
Mr. Saunders said the announcement was a sign that Macy’s management was trying to convince investors – frustrated by the company’s low profit margins – that it was capable of meeting the retailer’s challenges.
Even before he officially took office, Mr. Spring was already starting to make his mark. In January, he and outgoing CEO Jeff Gennette sent a memo to employees saying the company planned to cut about 2,300 jobs, or 13 percent of its workforce, in an effort to better align its resources with the customer behavior and to make decisions faster. The company also announced it would close a handful of stores.
The last major restructuring at Macy’s took place in February 2020, when the company announced the closure of 125 stores and the elimination of 2,000 jobs. Then the pandemic plunged many stores into darkness for weeks, forcing the retailer to scramble to improve its website and e-commerce offerings and figure out how to get people back into stores once they reopened.
Mr. Spring said Tuesday that the company would not have its “eyes bigger than its stomach” in running the remaining Macy’s stores. “We will take a thoughtful, methodical and unemotional approach,” he said.
J. Edward Moreno reports contributed.