NEW YORK (AP) – Department store operator Macy's said Tuesday it will close 150 low-productivity, same-name stores over the next three years, including at the end of the year, after posting a loss and declining sales in the fourth quarter. announced that it would close 50 stores.
As part of the strategy, Macy's is looking to upgrade its remaining 350 stores, adding more sales staff to try-on areas and shoe departments, as well as more visual displays such as mannequins. At the same time, the company signaled a shift towards luxury products, and overall sales were strong. The company announced that it will open 15 Bloomingdale's luxury cosmetics stores and 30 Bluemercury luxury cosmetics stores.
Macy's stores scheduled to close account for less than 10% of sales, the company said.
Although adjusted net income and sales beat Wall Street expectations, Macy's gave a conservative outlook for the year.
“We are taking the necessary steps to reinvigorate our relationship with our customers through an improved shopping experience, relevant selection and compelling value,” said Macy's CEO and former Bloomingdale's CEO Jeff. Tony Spring, Gennette's successor, said earlier this month.
Macy's stock rose more than 4% in afternoon trading.
The plan was announced as the department store chain faces a proxy fight from Arkhouse Management, which named nine directors for election to Macy's board last week. Last month, Macy's rejected a $5.8 billion takeover offer from hedge fund and investment manager Brigade Capital Management.
Activist investors and the pressure to increase sales are just two of the key issues facing new CEOs.
Even before the pandemic, department stores faced intense competition from online rivals. Neiman Marcus and J.C. Penney filed for bankruptcy protection and emerged as smaller companies.
Although behavior has changed, with some Americans trading up for lower-priced items, consumers have proven resilient and willing to shop even after an outbreak of inflation.
Spring told analysts that while inflation is slowing, labor force and wage growth are also slowing.
“As such, we expect consumers to continue to be under pressure,” Spring said, noting that the company will have to fight for market share in a challenging environment. Even “aspirational” luxury shoppers are turning away, he said.
Macy's is aiming to increase sales by accelerating the expansion of small stores that increase customer convenience. In October, the company announced plans to add up to 30 small stores by fall 2025, bringing the total number of stores to approximately 42. The next expansion round will begin in the fall.
Still, Macy's continues to cut jobs to cut costs. Macy's announced in January that it would cut about 3.5% of its workforce, or about 2,350 people, and close five stores. Spring told The Associated Press in a phone interview that he did not estimate how many employees would be affected because the closure would be over three years.
Arkhouse and Brigade offered $21 for each remaining Macy's share they didn't already own. Macy's said it had concerns about its financing plans and the value of the proposed acquisition.
Macy said last week that it is seeking additional financing information from Arkhouse and Brigade to potentially advance discussions with the board. Macy's said Arkhouse is seeking to extend the director nomination period by 10 days rather than provide additional information.
Spring told analysts that retailers still believe in physical footprint.
“We believe in stores,” he said. “We have to focus on having the best stores, not the most stores.”
The strategy came about after Macy's surveyed 60,000 customers about what they liked and disliked about their shopping experience. What they discovered was that customers wanted less clutter in the store and more service. Macy's is also undergoing a complete overhaul of its private brands, which will make its stores more visible and improve profit margins. The company is focused on upgrading its first group of 50 stores bearing the Macy's name, which will serve as “incubators,” Spring told The Associated Press.
Macy's reported a quarterly loss of $71 million, or 26 cents per share. Macy's earnings per share, adjusted for impairment and restructuring charges, were $2.45, beating Wall Street expectations of $1.98, according to FactSet.
That compares with profit of $508 million in the same period last year.
Revenue fell nearly 2% to $8.12 billion, but still beat industry analysts' expectations of $8.09 billion.
Online sales fell 4%, while in-store sales were almost flat.
Overall, comparable sales, which includes sales from stores open for at least one year and their digital channels, fell 5.4%.
At the company's namesake stores, sales at stores open more than a year, including licensed business, fell 6% in the latest quarter, compared with a 1.5% decline at Bloomingdale's.
The company expects earnings for the current fiscal year to be in the range of $2.45 to $2.85 per share, with revenue in the range of $22.2 billion to $22.9 billion.
Analysts had expected sales of $22.81 billion and full-year earnings of $2.77 per share.
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This article has been updated to correct that analysts expect Macy's to post revenue of $22.81 billion for the current fiscal year. Not $22.81.
