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|Macy’s, Inc. Outlines Moves to Drive Profitable Growth and Enhance Shareholder Value|
(Editor’s Note: Macy’s, Inc. this morning also issued a separate news release announcing second quarter 2016 sales and earnings and reaffirming full-year 2016 guidance.)
“We operate in a fast-changing world, and our company is moving forward
decisively to build further on Macy’s heritage as a preferred shopping
destination for fashion, quality, value and convenience. This involves
doing things differently and making tough decisions as we position
ourselves to serve customers who have high expectations of their
favorite stores, online sites and apps,” said
“The announcements we are making today represent an advancement in our
thinking on the role of stores, the quality of the shopping experience
we will deliver, and how and where we reinvest in our business for
growth. In the short term, our company’s topline sales will be somewhat
smaller, but the changes being made will position us to grow comparable
sales more quickly and generate a level of profitability that stands out
among retailers,” said
Re-creating the Macy’s Store Portfolio
Macy’s is re-creating its physical store footprint to capitalize on Macy’s unique competitive advantage of operating in the most attractive retailing locations in America. While still maintaining a significant bricks-and-mortar presence in 49 of the top 50 U.S. markets, Macy’s will operate fewer stores and concentrate its financial resources and talent on our better-performing locations to elevate their status as preferred shopping destinations. Stores will remain critical customer touchpoints for Macy’s, along with online shopping and mobile apps, as omnichannel retailing continues to evolve.
As part of this strategy, the company intends to close approximately 100 Macy’s full-line stores (out of a current portfolio of 728 Macy’s stores, including 675 full-line locations). Most of these stores will close early in 2017, with the balance closing as leases and certain operating covenants expire or are amended or waived. In a number of cases, stores will be closed as the value of the real estate exceeds their value to Macy’s as a retail store. The locations of the 100 stores to be closed will be announced at a later date, once the company makes final decisions. The company will act to remain connected to customers of the stores it will be closing by supplementing merchandise assortments in surrounding locations, as well as through the company’s online site and mobile app.
“Customers nearly everywhere in America will have easy access to Macy’s stores, with the additional convenience and increased functionality of our dynamic digital offering,” Gennette said.
“Nearly all of the stores to be closed are cash flow positive today, but their volume and profitability in most cases have been declining steadily in recent years. We recognize that these locations do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations for the Macy’s brand. We decided to close a larger number of stores proactively so we can invest in a winning customer experience in our most productive and highest-potential locations, as well as invest in growth sooner and more aggressively in digital and mobile,” Gennette said.
“We believe that this reduction of 100 locations in the short term will result in a more appropriate store portfolio for Macy’s in the longer term and help us to accelerate our progress in building a vibrant omnichannel brand experience. With this strategy, we will be able to reinvest in a more energized shopping experience in our remaining stores and elevate our total customer experience across all methods of shopping,” he added.
Together, annual sales volume of the approximately 100 closed locations,
net of sales expected to be retained in nearby stores and online, is
expected to be roughly
The company will communicate its store closing decisions directly with the associates in those locations prior to a public announcement. Macy’s is committed to treating associates affected by store closings with respect and openness. Associates displaced by store closings may be offered positions in nearby stores where possible. Eligible full-time and part-time associates who are laid off due to the store closing will be offered severance benefits.
Improving the Store and Online Shopping Experience
Macy’s will invest in improvements in ongoing stores and digital vehicles. These investments will take a range of forms.
In stores, Macy’s will be adding new vendor shops, bringing new businesses onto the sales floors through additional license agreements, increasing the size and quality of staffing through programs such as My Stylist personal shopping services, infusing new technology, accentuating high-potential businesses such as fine jewelry, and creating new in-store events and experiences.
Macy’s, Bloomingdale’s and Bluemercury also are reinvesting to maintain exceptional growth in digital sales – transactions generated from websites and apps. The company’s online business has grown at a compounded double-digit rate in each of the past 15 years, placing Macy’s, Inc. sixth on an independently published list of America’s largest-volume online retailers.
To foster continuation of this growth, the company is investing in capacity-building on its sites and apps, improvement in natural language search, faster page loading and simpler procedures for placing and fulfilling orders. Macy’s and Bloomingdale’s successful Buy Online Pickup in Store offering, introduced in 2013, is being refined to improve speed and convenience of the customer experience.
Moving Forward on Real Estate
The company continues to pursue opportunities to generate value from its real estate portfolio, consistent with our commitment to stores as a critical element of our long-term omnichannel strategy and balance sheet leverage objectives.
The company has been examining opportunities for four of Macy’s large
downtown flagship stores in various cities. We are in negotiations to
sell the Macy’s Men’s Store on
In addition to the flagship stores, the company continues to work on plans for optimizing its real estate portfolio in the context of our overall strategy, and it intends to continue to capitalize on situations where the development or redevelopment of all or a portion of a real estate holding exceeds the value of its existing use. This will occur through sales of assets or portions thereof (some of which are included in the 100 stores to be closed) and exploration of possible joint ventures or strategic alliances with development partners. We are in early-stage joint venture/strategic alliance discussions with various potential partners.
Non-cash asset impairment and other charges of
Macy’s, Inc. today operates 728 Macy’s stores. Over the past six years (2010 through 2016 to date), approximately 90 Macy’s stores have been closed and 13 new Macy’s stores have been opened. In addition, six new Macy’s Backstage offprice locations opened in fall 2015.
Macy’s, Inc., with corporate offices in
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are
based upon the current beliefs and expectations of Macy’s management and
are subject to significant risks and uncertainties. Actual results could
differ materially from those expressed in or implied by the
forward-looking statements contained in this release because of a
variety of factors, including conditions to, or changes in the timing
of, proposed transactions, prevailing interest rates and non-recurring
charges, store closings, competitive pressures from specialty stores,
general merchandise stores, off-price and discount stores,
manufacturers’ outlets, the Internet, mail-order catalogs and television
shopping and general consumer spending levels, including the impact of
the availability and level of consumer debt, the effect of weather and
other factors identified in documents filed by the company with the
(NOTE: Additional information on Macy’s, Inc., including past news releases, is available at www.macysinc.com/pressroom.)
Source: Macy’s, Inc.