Macy's Inc., once a titan of American retail, has announced plans to accelerate its store closure strategy, with 65 locations set to shutter by the end of the year. This move is part of a broader three-year plan to close 150 underperforming stores in an effort to streamline operations and revitalize the struggling brand.
CEO Tony Spring, who unveiled the updated plan during the company's quarterly earnings call on Wednesday, stated, "We now expect to close roughly 65 locations this year. Closures will occur post-holiday," allowing these stores to remain open through the busy holiday season before ceasing operations.
The closures, while aimed at improving profitability, underscore the continued challenges Macy's faces in an evolving retail landscape marked by the rise of e-commerce and dwindling foot traffic in suburban malls. Macy's, which once boasted over 1,100 stores at its peak in 2008, will be left with just 350 locations after the completion of the planned closures.
Sales at Macy's fell by 2.4% in the quarter ending November, contributing to a downward revision of the company's earnings outlook for 2024. Following the announcement, Macy's shares dropped more than 12% on Wednesday but showed slight recovery by Thursday.
Spring outlined the company's overarching goal to create a "sustainable, profitable growth" strategy through its "Bold New Chapter" initiative. The plan includes investments in high-performing stores, known internally as the "First 50," which will serve as prototypes for the next generation of Macy's locations. According to Spring, these remodeled stores showed promising results, with a 1.9% increase in third-quarter sales.
CFO Adrian Mitchell emphasized that the closures target stores with unfavorable economics. "These are places where customers have shifted away from those centers to shop. These are stores that are just incredibly difficult to run," Mitchell said, adding that most of the closures will not affect single-store markets.
Macy's plans to add approximately 45 Bloomingdale's and Bluemercury locations, which continue to demonstrate growth, even as it reduces its primary retail footprint. Additionally, the company plans to open nine new stores and remodel two more in the fourth quarter.
Despite these strategic moves, Macy's is grappling with other significant hurdles. An accounting scandal involving an employee who concealed over $150 million in delivery expenses has cost the company $79 million in its full-year outlook. Macy's has maintained that this was an isolated incident.
The closures come amid what industry experts have termed a "retail apocalypse," with a wave of store closures hitting multiple retail chains. According to GlobalData's Neil Saunders, Macy's situation reflects both challenges and resilience. "Macy's outlook is very mixed. There is still a big dose of decline in the numbers, but the chain isn't at the bottom of the department store league table," Saunders said, noting that while Macy's is struggling, it continues to generate profit and remains far from bankruptcy.
Macy's joins other major retailers downsizing their operations. Walgreens announced plans to close over 1,200 stores earlier this year, while Big Lots and Family Dollar are each shuttering hundreds of locations. Rising operational costs, shrinking profit margins, and increasing theft have compounded the difficulties for brick-and-mortar stores across the nation.
