by Macy’s said Tuesday it would vastly reshape its retail strategy and presence, closing about 150 Macy’s stores over the next three years and expanding its upscale Bloomingdale’s and Bluemercury chains.
The moves put the stamp on the company’s new CEO, Tony Spring, in an effort to keep America’s largest department store operator profitable and avoid a pending takeover bid.
This is the second major reduction for the Macy’s chain since 2020 and will leave the company with 350 stores, just over half of what it had before the pandemic.
The reform aims to “accelerate our path to market share gains, sustainable and profitable growth and value creation for our shareholders,” Spring, who took over this month, said in a statement.
Macy’s said it planned to close “underproductive locations,” noting that they accounted for 25 percent of the company’s total floor space but only 10 percent of sales. The company said it expected to earn between $600 million and $750 million by selling these stores and modernizing some of its warehouses.
The company said it would begin notifying workers Tuesday at stores it planned to close. It plans to close approximately 50 stores this fiscal year and the rest by the end of 2026.
As Macy’s stores close, the company plans to add 15 Bloomingdale’s locations. Bluemercury, its beauty chain, will add 30 stores, while others will be remodeled. In November, there were 58 Bloomingdale’s locations and 158 Bluemercury locations.
“There’s less competition there, but the problem is that it’s not clear that luxury department stores really have a great future,” said David Swartz, a retail analyst at financial services firm Morningstar. “Many luxury brands are doing their own direct sales.” He noted that luxury chain Nordstrom had been closing stores in recent years.
The company will open its smaller-format Bloomingdale’s stores, known as Bloomie’s, and outlet stores in 15 markets over the next three years, Spring said on a call with analysts.
In recent years, the company has been opening smaller stores inside open-air shopping centers, rather than indoor malls, which has been losing buyers.
“That’s where the whole market is headed,” Swartz said. “It makes sense for Macy’s to open stores in those smaller locations, but is it too late? There are already other companies doing the same thing, and will Macy’s really stand out and make up for the lost sales they will have by closing 150 stores?
The decision to reduce the mid-market Macy’s chain while increasing the presence of luxury chains is a sign that Spring wants to reposition the company’s overall image so that consumers see it as an upscale destination.
Customer research showed people wanted a better shopping experience at Macy’s, the company said, whether with better visual merchandising or more help from store workers. The savings the company expects from this strategy, including the sale of some of its assets, could help support such improvements.
Spring, who spent four decades at Bloomingdale’s, took the corporate reins at a difficult time. In December, a group of investors submitted a bid that would take Macy’s public at a value of $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.
Sales have fallen as Macy’s has struggled to win over the next generation of shoppers and compete in an increasingly e-commerce-oriented world.
Mr. Spring had already begun to make his mark. In January, a memo to employees from him and outgoing CEO Jeff Gennette said the company would cut about 2,300 jobs, or 13 percent of its corporate workforce, as it sought to better align its resources with customer behavior and make decisions faster. The company also said it planned to close some stores.
The last major restructuring at Macy’s was in February 2020, when the company said it would close 125 stores and eliminate 2,000 jobs. Then the pandemic closed many stores 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.
After an initial boost in sales due to consumer spending on all types of items at the start of the pandemic, Macy’s has faced a decline in sales.
On Tuesday, the company also reported fourth-quarter earnings, which included the holiday shopping season. Net sales of $8.1 billion were in line with analyst estimates. Sales at both Macy’s and Bloomingdale’s were down from a year earlier, while those at Bluemercury rose 2.3 percent, a sign that shoppers are gravitating toward the beauty and skin care categories.
