Macy’s will close 125 stores, cut about 2,000 workers and shut its dot-com headquarters in San Francisco and its corporate offices in Cincinnati. The approximate 125 stores closing over the next three years account for $1.4bn of Macy’s $24bn in annual sales and includes the previously revealed 30 stores currently in the process of closing. The 2,000 workers losing their jobs represent 9% of the corporate and support staffs. Macy’s has long been saddled with many weak stores, to a large degree stemming from its acquisition of May Co. in 2005.
Through the restructuring, Macy’s expects annual gross cost savings of $1.5bn to be fully realized by year-end 2022, with $600mn gross cost savings achieved in 2020.
While disclosing the widespread reductions across the business, Macy’s also outlined growth manoeuvres, among them:
- Creating four $1bn “power” private brands. A new private brand sourcing strategy is being implemented geared to reduce costs and improve speed.
- Redesigning the fulfilment network with the aim of improving inventory productivity through increased sell-throughs and lower markdown rates.
- Continuing to invest in stores operating in the best malls.
- Continuing to expand the Backstage off-price concept. In 2020, an additional 50 Backstage departments inside Macy’s stores and seven additional freestanding, off-mall Backstage stores will open.
- Exploring new off-mall formats.
- Continuing to invest in web sites and mobile apps.
- Enhancing the Macy’s Star Rewards loyalty program.
Digital continues to grow at Macy’s divisions, and generates more than $6bn of Macy’s $25bn in annual sales. In assessing the store portfolio, Macy’s analysed future predicted profitability based on consumer trends and demographics. Across the remaining store fleet, the company is either reducing or adding staff. Macy’s operates 680 department stores and 190 specialty stores. This year, 100 stores will be upgraded with physical enhancements, technology improvements, and changes in talent and local marketing. To date, this treatment has been applied to 150 stores, which account for approximately 50% of 2019 total stores’ sales. These stores continue to outperform the balance of the fleet.
For 2019, fourth-quarter net sales are estimated at $8.3bn, and for the full year are estimated at $24.5bn.