Macy’s will close 150 unproductive namesake stores over the next three years including 50 by year-end, the department store operator said Tuesday after posting a fourth-quarter loss and declining sales.
As part of the strategy, Macy’s aims to upgrade its remaining 350 stores, with plans to add more salespeople to fitting areas and shoe departments, while adding more visual displays like mannequins. At the same time, the company signaled a pivot to luxury, which has fared better overall. It said it would open 15 of its higher end Bloomingdale’s stores and 30 of its luxury Blue Mercury cosmetics locations.
Less than 10% of Macy’s sales come from the locations that are scheduled to shut, according to the firm.Despite adjusted net profits and revenue exceeding Wall Street forecasts, Macy’s provided a cautious year outlook.
Tony Spring, the CEO of Macy’s, who took over for Jeff Gennette earlier this month, formerly led Bloomingdale’s. “We are making the necessary moves to reinvigorate relationships with our customers through improved shopping experiences, relevant assortments, and compelling value,” Spring stated. Macy’s stock increased by about 4% in early trade.
The moves are made in response to Arkhouse Management’s proxy challenge to the department store operator. Last week, Arkhouse Management submitted a slate of nine directors for election to the Macy’s board. A $5.8 billion buyout bid from the hedge fund and investment management Brigade Capital Management was turned down by Macy’s last month. The need to boost sales and activist investors are only two of the new CEO’s pressing problems.
Department shops faced intense competition from internet competitors even prior to the epidemic. JCPenney and Neiman Marcus both declared bankruptcy, becoming smaller companies as a result.
Even after a period of inflation, consumers have shown to be resilient and eager to purchase; yet, some Americans have changed their purchasing habits and are now prepared to settle for less expensive products.
Analysts were informed by Spring that although inflation has decreased, pay and labor growth have not.
Spring stated, “As such, we expect our consumer to remain under pressure,” acknowledging that the business must compete hard for market share in a challenging climate. According to him, even “aspirational” luxury buyers have retreated.
In an effort to boost sales, Macy’s is expanding small-format stores faster so they can offer its consumers greater convenience. 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.To decrease expenses, Macy’s is still reducing staff. About 2,350 workers, or 3.5% of the company’s entire staff, would be let go, and five stores would close, according to Macy’s announcement in January. As the closures will take place over a three-year period, Spring told The Associated Press over the phone that he did not have an estimated number of personnel affected.
In an effort to boost sales, Macy’s is expanding small-format stores faster so they can offer its consumers greater convenience. 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.
To reduce expenses, Macy’s is still laying off employees. Macy’s said in January that it will eliminate five sites and reduce around 2,350 people, or about 3.5% of its whole staff. In a phone conversation with The Associated Press, Spring stated that he was unable to estimate the number of people affected because the closures will take place over a three-year period.Macy’s reported a $71 million, or 26 cents per share, quarterly deficit. FactSet reports that Macy’s earned $2.45 per share after accounting for impairment and restructuring expenses, above Wall Street estimates of $1.98.
In comparison, the same quarter previous year saw a profit of $508 million.Although sales decreased by over 2% to $8.12 billion, they were still higher than the $8.09 billion predicted by industry analysts. While retail sales were relatively unchanged, online sales fell by 4%.Comparable sales overall decreased by 5.4%, which comprised sales at shops and its internet outlets that had been operational for at least a year.
Sales at its namesake stores decreased 1.5% at Bloomingdale’s and 6% at its locations operating for at least a year, including its licensed business, in the most recent quarter.For the current fiscal year, the business anticipates sales between $22.2 billion and $22.9 billion, and earnings between $2.45 and $2.85 per share.
On revenues of $22.81, analysts projected a yearly profit per share of $2.77.
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