Macy’s stores close in consolidation

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Macy’s, Inc. announced on Jan 4 a series of actions to streamline its store portfolio and intensify cost efficiency efforts. This would bolster its strategy to further invest in omni-channel capabilities, improve customer experience and create shareholder value.

These actions include:

  • The closure of 68 stores and reorganisation of the field structure that supports the remaining stores, reinforcing the strategy of fewer stores with better customer experience. These are part of the approximately 100 closings announced in August 2016.
  • The significant restructuring of the Macy’s, Inc. operations to focus resources on strategic priorities improve organisational agility and reduce expense.
  • The sale of properties consistent with the previously announced real estate strategy.

These actions are estimated to generate annual expense savings of approximately $550 million, beginning in 2017, enabling Macy’s Inc. to invest an additional $250 million in growing the digital business, store-related growth strategies, Bluemercury, Macy’s Backstage and in China. These savings, combined with savings from initiatives implemented in early 2016, exceed the $500 million goal communicated in fall of 2015, one year earlier than expected.

“While we are pleased with the strong performance of our highly-developed online business, as well as the progress we have made on selling and visual presentation programs and expense-reduction initiatives in 2016, we continue to experience declining traffic in our stores where the majority of our business is still transacted,” said Terry Lundgren, Chairman and CEO of Macy’s, Inc.

“Given the overall trends challenging us and the broader retail industry, and the time needed to execute new strategies, we expect our 2017 change in comparable sales to be relatively consistent with our November-December sales trend. Our omni-channel strategies continue to evolve based on the changes in our customers’ shopping behaviours, including a focus on buy online, pickup in store and mobile-enabled shopping. In addition, we have invested in and enlarged our customer data and analytics team, which will help drive our new marketing strategies for 2017,” he added.

In conjunction with the announcement, approximately $250 million of charges or 50 cents per share (of which approximately $210 million is expected to be cash) are expected to be recorded in the fourth quarter of 2016.

Store Portfolio Restructure

Of the 68 Macy’s store closings, three closed mid-year, 63 will be closed in early Spring 2017 and two will be closed in mid-2017. Three other locations were sold, or are to be sold, and are being leased back. The company intends to close approximately 30 additional stores over the next few years as leases or operating covenants expire or sale transactions are completed.

As a result of closing 63 Macy’s stores in early 2017, along with the three closed mid-year 2016, the company’s 2017 sales are expected to be negatively impacted by approximately $575 million. This reflects the company’s ability to retain sales at nearby stores and on macys.com through targeted marketing and merchandising efforts.

“As we’ve noted, it is essential that we maintain a healthy portfolio of the right stores in the right places. Our plan to close approximately 100 stores over the next few years is an important part of our strategy to help us right-size our physical footprint as we expand our digital reach,” said Lundgren.

Four new Macy’s and Bloomingdale’s stores are currently planned and/or under construction. New Macy’s and Bloomingdale’s stores are also planned to open in Abu Dhabi, and one Bloomingdale’s store is planned to open in Kuwait, all under license agreements with the Al Tayer Group. The company also plans to continue its expansion of Macy’s Backstage (within Macy’s stores) and Bluemercury.

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