Iconic department store Macy's is taking significant steps to revamp its business strategy, announcing plans to expand a recent store closure initiative as part of its "Bold New Chapter" initiative. During the third-quarter earnings call held on Wednesday, Macy's chairman and CEO Tony Spring revealed the company would close 65 underperforming stores by the end of January 2025, up from the previously projected 55 closings by the end of the fiscal year. This decision aligns with Macy's goal of fundamentally repositioning the company and enhancing its customer experience, which Spring described during the session.
The news about the upcoming closures emanates from financial reports indicating Macy's total net sales totaled $4.7 billion for the third quarter, marking a 2.4 percent decline compared to the same period last year. Compounding these challenges, Macy's recently discovered and concealed accounting error led to the loss of $151 million, causing share prices to tumble, according to reports from The Wall Street Journal.
This move to shutter stores is part of Macy's commitment to what they call the "Bold New Chapter" initiative, which aims to improve the company’s financial health and streamline its operations. Initially announced at the beginning of the year, the plan outlined intentions to close 150 underproductive Macy's locations through to 2026. Now, as the company gears up for broader changes, they view these closures as pivotal. Spring noted, "At the start of the closure strategy said we had locations identified as less profitable. We're trying to monetize them as soon as possible, and this reflects not just the closure numbers but the underlying value of our assets even amid turbulent markets."
While the focus is predominantly on closing stores, Macy's hasn't raised its shutters completely. The company is also planning to launch 15 new Bloomingdale's stores and open 30 new Bluemercury outlets, alongside 30 remodels of existing Bluemercury sites through 2026. According to Adrian Mitchell, Macy's chief financial officer and chief operating officer, both Bloomingdale’s and Bluemercury reported strong financial results, with Bloomingdale's sales increasing by 1.4 percent, and Bluemercury seeing its sales climb by 3.2 percent.
Currently, there are 475 traditional Macy's locations scattered across the United States, with 50 high-performing stores dubbed "First 50" where the company has invested heavily. These stores have not only held their ground but reported comparable-store sales growth of 1.9 percent during the last quarter, serving as models for Macy's future strategies. The performance of these stores, particularly the handbag and shoe departments, has prompted plans for added staffing and resources to cater to customer demands across 100 more stores.
Although there are positive signs, challenges loom on the horizon. Experts express skepticism about Macy’s long-term viability. Morningstar analyst David Swartz commented, "Macy’s is constantly downsizing and just hoping for turnaround plans to improve remaining store performance. Historically, we haven't seen this work out well, so there’s hesitance among investors and analysts alike."
Despite indications of growth among the "First 50" stores, there’s no clear roadmap as to how the remaining stores will fare, especially as the company gears up for the hefty fourth-quarter holiday shopping season, which previously accounted for around 35 percent of its annual sales.
Uncertainty surrounds not just the holiday season's outcome but also future sales trajectories as customers increasingly favor online shopping over traditional brick-and-mortar experiences, leading to worries about foot traffic and sales volumes. Although there are indicators of adaptation, such as plans for expansive staffing and maintaining performance at select stores, Macy's remains enmeshed within the fluctuative dynamics of the retail sector.
Critics look at these maneuvers with caution, as Macy's navigates these troubled waters—both from within and the broader economic environment. The expectation now rests on how effectively the company will merge new initiatives with real-world expectations, whether they can divorce their financial struggles from their historical retail model.
Despite announced plans to revitalize aspects of the business, details on which 65 stores will get the axe remain undisclosed, creating curiosity and speculation among employees and consumers alike. Will these closures prove to be mere echoes of past missteps? Or will they serve as the catalyst Macy's needs for revitalization? Only time will tell, as the company prepares for the high-stakes challenge of making the most of the busy holiday shopping period—providing both opportunity and risk amid these transformative changes to the business.
