One of the oldest retailers in the U.S. will be closing 125 of its department stores in the next three years. Macy’s announced the latest developments while acknowledging that e-commerce is likely a major cause of its declining sales. In all, Macy’s will be closing one-fifth of its store locations. The retailer also said that it plans to reopen smaller stores located outside of malls as shoppers make fewer trips to large shopping centers.
Macy’s also says that it’s shearing around 2,000 of its corporate positions. That equates to 10 percent of its corporate staff. Several of its offices will be closed in the cutbacks, including one of its headquarters in Cincinnati. The majority of its headquarter operations is in New York.
The retailer will maintain operations of nearly 400 namesake stores while it restructures. The store has had to deal with a slump over the past year, a big departure from previous years when Macy’s took the lead over other large department store chains. Other stores, like Sears and J.C. Penney, are also struggling as e-commerce retailers, like Amazon, thrive.
Jeff Gennette, Macy’s CEO, said: “Our goal is to reclaim and revitalize what a department store should be. Department stores are still vital if they are done right. There is viability to having many categories and brands under one roof.”
Gennette took over the leadership of Macy’s in 2017. He focused on creating magnet locations to draw shoppers in and invested more in its high-performing flagships. The retailer upgraded its top 150 locations and plans to do another 100 this coming year.
The 161-year old chain plans to move many of its retail operations to small strip centers. The retailer believes malls are outdated as people flock to more convenient ways to shop. That includes smaller stores that are more convenient for consumers to navigate. The new stores will be easier to access off main roads and the actual store sizes will be a tenth of the size of the larger traditional Macy’s stores. According to Gennette, five new stores may be open by the end of 2020. The company plans to open stores in Washington, D.C. and Dallas, Fort Worth, among others.
As part of its $480 million revamping plans, Macy’s also plans to build an office tower over its Herald Square flagship that’s located in New York City. Macy’s said that by the end of 2022, the store should save $1.5 billion a year through its restructuring efforts. According to Gennette, Macy’s will reinvest some of the savings in technology and upgrading its operations.
After the store closings, Macy’s will still have 400 of its stores in operations. The company will also continue to operate around 40 Bloomingdales’ stores as well as about 170 of its Bluemercury beauty chain.
The brick and mortar retailer also plans to divest and redevelop its current real estate. Macy’s owns most of the properties outright as well as some through ground leases. Its real estate transactions from the past four years have yielded $1.6 billion in revenue. Macy’s hopes to end up with $130 million in real estate transactions this year.
Gennette said: “We have excess square footage in our parking lots.” He elaborated that the land could be redeveloped for fast-food restaurants or even banks.
The retailer believes revenue fell around 1.5 percent in 2019, but the numbers are still being tallied.
Macy’s today as we know it was formed by an $11 billion merger between May Department Stores Co. and Federated Department Stores, Inc. Once the merger took place in 2005, Macy’s had more than 800 department stores, which included Bloomingdales.