Macy’s to close 150 stores but expand Bloomingdale’s and Bluemercury

Macy’s to close 150 stores but expand Bloomingdale’s and Bluemercury

Macy’s said Tuesday it would vastly overhaul its retail strategy and presence, closing about 150 Macy’s stores over the next three years and expanding its upscale Bloomingdale’s and Bluemercury chains.

The moves put the stamp of the company’s new CEO, Tony Spring, in an effort to improve the profitability of the largest U.S. department store operator and avoid a possible takeover bid.

This is the second major reduction for the Macy’s chain since 2020 and will leave the company with 350 stores, just over half of what it had before the pandemic.

Macy’s called the stores it planned to close “underproductive locations” that accounted for 25 percent of the company’s total square footage but only 10 percent of sales. The company said it expected to earn between $600 million and $750 million by selling these stores and modernizing some of its warehouses.

“We have to focus on having the best stores, not the most stores,” Spring said on a call with analysts Tuesday.

The company said it would begin notifying workers that same day at stores it planned to close. It plans to close approximately 50 stores this fiscal year and the rest by the end of 2026.

Macy’s did not identify the locations, but one is the San Francisco store in Union Square, Mayor London Breed’s office said. The store, a fixture in the business district for generations, will remain open for the next year while Macy’s searches for a new owner for the property, the mayor’s office said.

As Macy’s reduces its retail presence, Bloomingdale’s is expected to open 15 locations. Bluemercury, the company’s beauty chain, will add 30 stores and remodel others. In November, there were 58 Bloomingdale’s locations and 158 Bluemercury locations.

“There’s less competition there, but the problem is that it’s not clear that luxury department stores really have a great future,” said David Swartz, a retail analyst at financial services firm Morningstar. “Many luxury brands are doing their own direct sales.”

E-commerce sales at Bloomingdale’s give the company confidence that adding stores will boost digital sales in surrounding areas. He said about 80 percent of Bloomingdale’s digital sales are made in markets where it has physical stores.

The company will open its smaller-format Bloomingdale’s stores, known as Bloomie’s, and outlet stores over the next three years, Spring said on the call. In recent years, the company has been opening smaller stores in shopping centers, rather than enclosed malls, which has been losing buyers. “That’s where the whole market is headed,” Swartz said.

“It makes sense for Macy’s to open stores in those smaller locations, but is it too late?” he said. “There are already other companies that do the same thing.”

The decision to reduce the mid-market Macy’s chain while increasing the presence of luxury chains is a sign that Spring wants to reposition the company’s overall image so that consumers see it as an upscale destination. But, she said, that doesn’t necessarily mean the company’s stores will become a more expensive place to shop.

“I don’t think taste and style should cost more; “I don’t think it should be reserved for the rich,” Spring said in an interview Tuesday. “I think we need to do a better job in our content, in our presentation and in our marketing, so that the customer sees and is inspired by what we are selling.”

Customer research showed people wanted a better shopping experience at Macy’s, the company said, whether with better visual merchandising or more help from store workers. The sale of some of its assets could help support such improvements, including revamping the merchandise assortment and adding more workers in areas such as the footwear and women’s ready-to-wear departments.

Macy’s will increase the number of workers in some of its stores, using data to determine appropriate staffing levels and training workers on how to recommend products to shoppers and better assist them in fitting rooms.

Spring, who spent four decades at Bloomingdale’s, took the corporate reins at a difficult time. In December, a group of investors submitted a bid that would take Macy’s public at a value of $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, said that unless the retailer began sharing non-public information with them, they could take their offer to shareholders.

Since then, activists have nominated nine people to Macy’s board of directors. The company said in a statement last week that the activists had not provided funding details and had instead opted to initiate the proxy contest. On Tuesday, Spring told analysts that Macy’s board was evaluating candidates, but asked that her questions concerned only the retailer’s financial results and the three-year strategy she had announced.

A representative for the investor groups did not respond to a request for comment Tuesday.

After an initial surge in sales due to consumer spending on all types of items at the start of the pandemic, Macy’s has seen a decline in sales.

On Tuesday, the company also reported fourth-quarter earnings, which included the holiday shopping season. Net sales of $8.1 billion were in line with analyst estimates. Sales at both Macy’s and Bloomingdale’s were down from a year earlier, while those at Bluemercury rose 2.3 percent, a sign that shoppers were still gravitating toward the beauty and skin care categories.

The company said it would incur a $1 billion charge related to the restructuring and store closures. At the end of the day the shares rose almost 3.4 percent.

Sales have fallen as Macy’s has struggled to win over the next generation of shoppers and compete in an increasingly e-commerce-oriented world.

“Macy’s simply hasn’t done its best for the consumer, so consumers have abandoned it and shopped elsewhere,” said Neil Saunders, managing director at research firm GlobalData. “This is a turning point for Macy’s.”

Saunders said the announcement was a sign that Macy’s management was trying to convince investors — who had become frustrated with the company’s weak profit margins — that it was capable of addressing the retailer’s challenges.

Even before officially taking over, Spring was already beginning to make his mark. In January, he and outgoing CEO Jeff Gennette sent a memo to employees saying the company planned to eliminate about 2,300 jobs, or 13 percent of its corporate workforce, as it sought to better align its resources with customer behavior and to make decisions faster. The company also said it would close some stores.

The last major restructuring at Macy’s was in February 2020, when the company said it would close 125 stores and eliminate 2,000 jobs. Then the pandemic closed many stores for weeks, forcing the retailer to scramble to improve its website and e-commerce offerings and figure out how to get people back into stores once they reopened.

Spring said Tuesday that the company would not “take on more than we can chew” as it manages the remaining Macy’s stores. “We will be thoughtful, methodical and unemotional in our approach,” she said.

J. Eduardo Moreno contributed with reports.

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John C. Johnson

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