Macy’s announced on Tuesday that it will close 150 underperforming stores over the next three years as it seeks to revive itself by focusing more on luxury products and better service.
Fifty stores are to shut down by the end of this year. The downscaling will leave the century-and-a-half-old brand with 350 of its currently existing outlets by the end of 2026.
Macy’s new strategy—called “A Bold New Chapter”—includes modernizing many of the existing stores and opening approximately 15 Bloomingdale stores and at least 30 new Bluemercury stores in new and existing locations.
The plans to open 30 additional small-format stores away from shopping malls through the fall of 2025, announced last October, have remained unchanged.
“It’s going back to basics and balancing the art and science of retail,” Macy’s new CEO Tony Spring said in a Tuesday conference call with investors.
He called the issues the ailing retailer is facing “similar to what I first encountered at Bloomingdales,” the company he’s led for the past nine years and worked at for 36.
“Our threshold to keep a store open has become more stringent,” Mr. Spring continued. “In the past we may have continued to operate a store that was cash flow positive. Now the bar has been raised.”
The 150 stores marked for closure represent about 25 percent of Macy’s square footage but account for only 10 percent of sales.
“We believe paring down the Macy’s store base to a more manageable (and profitable) size is prudent given the general structural shift towards online spending and the shift away from department stores,” retail analyst Dana Telsey said in a note to clients.
Before the planned store closures, Macy’s had cut jobs to reduce costs. In January, the company said it was laying off about 3.5 percent of its total workforce, roughly 2,350 employees, and shut five stores.
The announcement of the restructuring plan comes after Macy’s last month rejected an unsolicited $6 billion takeover bid from activist investors Arkhouse Management and partner Brigade Capital Management.
Mr. Spring expects the restructuring plan, which has the full support of the board of directors, to reinvigorate the brand and create long-awaited value for its shareholders—Macy’s stock price has been decreasing steadily over the last nine years from a $73 peak in 2015 to just $20 today.
But he cautioned that the results may not be immediately visible.
“Fiscal 2024 will be a transition and investment year,” he said, expecting to see consistent sales and profit growth from 2025 onward.
In a news release to its investors, Macy’s explained that its “Bold New Chapter” aims to “put the customer first” by reassessing its assortment and offering “compelling value” by simplifying and modernizing the shopping environment, including its online retail platform. The continued expansion of small-format stores, focusing more on its successful luxury brands Bloomingdale’s and Bluemercury.
The restructuring plan also involves a behind-the-scenes overhaul of the inventory planning and allocation operations to improve speed and efficiency.