Blog Coverage Waning Sales Forces Macy’s to take Tough Call with 68 Stores Closures and 10,000 Job Cuts

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LONDON, UK / ACCESSWIRE / January 6, 2017 / Active Wall St. blog coverage looks at the headline from department store chain Macy’s Inc. (NYSE: M) as the Company announced on January 04, 2017, that it plans to take tough actions, including closure of 68 stores and over 10,000 job cuts, to improve organizational efficiency and reduce costs. The other decisions include sales of a few real estate assets and cost-cutting measures. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

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The tough decisions were taken in the backdrop of a disappointing holiday season in terms of sales. The declining sales also led the company to lower its annual earnings forecast.

Macy’s operates stores under the brands Macy’s, Bloomingdale’s, Bloomingdale’s Outlet, Macy’s Backstage and Bluemercury. It also has online retail presence through its websites – macys.com, bloomingdales.com and bluemercury.com.

The Action Plan

Macy’s currently operates 730 stores as on date. Out of these, the Company is closing 68 stores which are part of the 100 store closures announced in August 2016. The Company is closing only stores which are unproductive or store locations which have lost their allure to customers due to changing retail landscape. Three of the 68 stores have already been closed in 2016, 63 stores are scheduled to be closed in early spring of 2017 and the remaining two stores will be closed by mid-2017. Macy’s plans to close an additional 30 stores in the next few years as soon as the current lease expires/ contracts end or where it manages to find buyers for its stores. These store closures are set to impact the overall sales of the company and will result in a sales loss of over $575 million for the year 2017. The closure of these stores will immediately impact 3,900 jobs.

Macy’s has planned a complete overhaul of its organization and aims for a leaner structure by reducing the number of layers in the organization structure. The leaner structure will encourage faster decision making and improves efficiency. Macy’s aims to increase savings by reducing non-payroll costs and other expenses.

Macy’s plans to give special attention to the store operations and field infrastructure as these have direct impact to customers’ reaction and store sales.
The Company estimates that these organisational changes will again impact 6,200 jobs.

Macy’s also aims to raise funds through its real estate initiatives which include sale/ lease of stores which has closed down and sale of some of its real estate holdings.

Commenting on the development Terry J. Lundgren, Chairman and CEO of Macy’s said:

“Our omnichannel strategies continue to evolve based on the changes in our customers’ shopping behaviors, 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.”

Impact of Action Plan

Macy’s plans to help employees who face a job cut by placing them in the nearest Macy’s store location. The Company will also be paying severance benefits to all eligible employees impacted by the store closures.

Macy’s expects that the steps taken based on its Action plan will help it save approximately $550 million in 2017. The funds generated from the savings along with an additional $250 million will be invested in expanding Macy’s digital business and future growth planned for Bluemercury, Macy’s Backstage and expansion in China.

Macy’s real estate initiatives have generated $95 million in cash till date in the current financial year.

Future Plan

Macy’s decision to close stores does not mean that its the end of the road for the company, rather it simply means that the Company has shifted its focus and has a different game plan. The Company plans to open two stores in 2017, one at Los Angeles, California and the other in Murray, Utah. It is opening two Bloomingdale stores one in San Jose, California and the other in, Norwalk, Connecticut in 2019. Macy’s also plans to open 50 new Macy’s Backstage and 50 Bluemercury beauty specialty stores in the next two years.

Macy’s had revised its earnings guidance for the fiscal year ending on January 28, 2017 and expects its diluted earnings per share to be in a range of $2.95 to $3.10 against the previously announced guidance of $3.15 to $3.40.

Stock Performance

Macy’s share price finished yesterday’s trading session at $30.86, tumbling 13.90%. A total volume of 29.24 million shares exchanged hands, which was higher than the 3 months average volume of 5.98 million shares. The stock is trading at a PE ratio of 14.11 and has a dividend yield of 4.89%.

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