Macy’s said on Tuesday that it will close approximately 125 of its least productive stores over the next three years as well as its corporate office in Cincinnati a part of a new “updated strategy and three-year plan designed to stabilize profitability and position the company for growth.”
Of these store closures, 30 are already in the process of closing. These approximately 125 stores currently account for approximately $1.4 billion in annual sales. Across the remaining store fleet, the company is adjusting its staffing with reductions in some stores and increases in others.
Macy’s will expand its “Growth” treatment to the remaining store portfolio, including upgrading an additional 100 stores in 2020. The “Growth” treatment includes improvements to the physical store, as well as investments in merchandising strategies, technology improvements, talent, and local marketing. To date, this treatment has been applied to 150 stores, which account for approximately 50 percent of 2019 total stores’ sales.
The company’s off-price offerings, Backstage and Bloomingdale’s The Outlet, have been a highlight of the company’s performance and will continue to expand Macy’s Backstage over the next three years. In 2020, the company plans to open an additional 50 Backstage store-within-store locations and 7 additional freestanding, off-mall Backstage stores.
The company is also testing a new store format, Market by Macy’s, a smaller than average Macy’s store that will be located off-mall in lifestyle centers. Market by Macy’s will feature a mix of curated merchandise and local goods, as well as local food and beverage options and a robust community events calendar. The company will open its first Market by Macy’s in Dallas on February 6, 2020.
“Our customers expect convenience and a tailored experience across all channels,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “We have an opportunity to build a broader yet integrated Macy’s experience within a metropolitan area by investing in our magnet stores, building freestanding Backstage locations and testing new, off-mall store formats. The more convenient, brand-right touchpoints we have, the greater loyalty and engagement we engender. This will enable us to grow with the next generation of American shoppers.”
Another major change Macy’s is making is to its office consolidation. New York City will become the company’s sole corporate headquarters and will be closing its San Francisco, downtown Cincinnati and Lorain, OH offices. It will also close its Tempe, AZ customer contact center and consolidate customer service work into its Mason, OH, and Clearwater, FL facilities.
With these corporate closures, the retailer will be making a reduction in its corporate and support function headcount of 9 percent, or approximately 2,000 positions.
“We are taking the organization through significant structural change to lower costs, bring teams closer together and reduce duplicative work,” added Gennette. This will be a tough week for our team as we say goodbye to great colleagues and good friends. The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile and better fit to compete in today’s retail environment.”
Macy’s also made changes to its senior management team. John Harper, formerly chief stores officer, has assumed the role of chief operations officer with expanded responsibility for stores, technology, supply chain, and brand experience. Marc Mastronardi is now chief stores officer, reporting to Harper. Mastronardi was most recently senior vice president of store operations and customer experience. And, Danielle Kirgan, chief human resources officer, is taking on an expanded role as chief transformation and human resources officer. She will lead the company’s transformation work.
Beginning in 2020, the company expects this new strategy to generate annual gross savings of approximately $1.5 billion, which will be fully realized by year-end 2022. For 2020, the company anticipates gross savings of approximately $600 million, some of which will flow to the bottom line in order to stabilize operating margin.
“We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams,” added Gennette. “Over the past three years, we have shown we can grow the top-line; however, we have significant work to do to improve the bottom-line. We are confident the strategy we are announcing today will allow us to stabilize margin in 2020 and set the foundation for sustainable, profitable growth.”