Macy's Slashes Locations in Big Retail Restructuring

In an attempt to revitalize its company and stave off an activist investor takeover, Macy's said on Tuesday that it will eliminate about 150 underperforming shops over the next three years.

The department store firm declared that it will concentrate on growing its two premium brands, Bluemercury and Bloomingdale's. Over the course of the upcoming year, Macy's will close 50 stores. In general, the reorganization plan calls for Macy's to retain 350 outlets.

The decision to close stores follows Macy's rejection of a $5.8 billion takeover bid from Arkhouse Management and Brigade Capital Management last month. Financial institutions have expressed interest in Macy's, citing its substantial real estate holdings, which are believed to be undervalued in the stock market.

In response to Macy's recent refusal of the acquisition offer, the company has unveiled a new strategic plan aimed at providing investors with a much-needed "positive narrative." Neil Saunders, an analyst at GlobalData, highlighted the significance of this overhaul in reassuring investors about the company's direction.

After nine years as CEO of Bloomingdale's, Tony Spring, the CEO of Macy's, stated that the company's plan to eliminate its failing locations will eventually help it stabilize its revenues, with an emphasis on customer service and updated product lines.

According to Spring, Macy's challenges are "similar to what I first encountered at Bloomingdales - it's going back to basics and balancing the art and science of retail," she stated on a Tuesday investor conference call.

Though they make up only 25% of Macy's total square footage, the shuttered locations generate 10% of its sales.

Macy's Store Closures and Strategic Focus

The stores that Macy's intends to shut are not publicly disclosed. The retailer's main store in Union Square, a once-bustling shopping neighborhood in San Francisco, is one noteworthy location that is slated for closure, according to the San Francisco Business Times. Rhe building housing the shop dates back to 1929, when Macy's was still known as O'Connor, Moffat & Co., making it one of the chain's largest and oldest stores.

Focusing on Macy's 350 top-performing stores could prove beneficial for the retailer, which has faced declining sales due to a historical neglect of its business operations, according to Neil Saunders, an analyst at GlobalData.

Saunders expressed optimism about the potential modernization of the shopping experience in these stores, anticipating full refurbishments and adequate staffing levels to enhance service quality and visual appeal. He emphasized that addressing these shortcomings has been a critical area where Macy's has consistently lagged behind, highlighting the importance of this strategic correction.

Similar to other physical shops, Macy's is facing a decline in sales across the board as a result of growing competition from online merchants. The business said on Tuesday that its net sales for the fourth quarter decreased 1.7% to $8.1 billion. Macy's same-store sales decreased by 6% during the fourth quarter.

Despite a better economy, spring hinted that Macy's would see some challenging short-term challenges given the financial difficulties faced by certain American consumers.

Macy's intends to boost sales by growing its small-format stores, which it believes may offer more convenience to customers, concurrently with its intentions to close some sites. In October, it declared that it will add as many as thirty small-format sites by the fall of 2025, for a total of about forty-two. Fall marks the beginning of the following growth phase.

In order to save expenses, Macy's has begun laying off employees prior to the scheduled shop closings. Macy's said in January that it will close five locations and reduce 3.5% of its overall employment, or around 2,350 workers. According to CNBC, the stores that were originally revealed to be closing are located in Tallahassee, Florida; Lihue, Hawaii; San Leandro, California; Arlington, Virginia; and Simi Valley, California.

For many years, Macy's has been shutting failing locations; as of 2018, the corporation operated around 640 locations nationwide. Spring stated on the call that Macy's hopes to earn gains of up to $350 million from asset sales by eliminating 150 shops over the next three years.

In early trading, Macy's shares increased 5.7% to $20.40, valuing the business at $5.6 billion.