Macy’s, the iconic American department store chain, announced a major restructuring plan on Thursday aimed at cutting costs and adapting to shifts in consumer shopping habits. The plan includes laying off approximately 3.5% of its corporate and support workforce, closing 5 stores, and making further investments into areas like technology and ecommerce.
Overview of Restructuring Plan
The restructuring plan was unveiled alongside Macy’s Q4 2023 earnings results, which saw revenue decline over 6% compared to the previous year. With the company facing increasing economic headwinds and pressure from activist investors, management stated the changes were necessary to “align with customer preferences and improve profitability.”
Key aspects of the plan include:
- Staff cuts: Elimination of 2,350 positions out of a total workforce of around 130,000. The cuts will impact mostly corporate and back-office roles.
- Store closures: Closing of 5 stores out of a total of around 500 full-line Macy’s stores. The company did not specify which locations.
- Cost reductions: $100 million in additional cost cuts across the organization, including through supply chain optimization, improved sourcing, and general expense management.
- Tech investments: $75 million allocated towards further building out ecommerce capabilities and improvements to mobile apps and websites.
- Going private? Management said it would evaluate any reasonable privatization proposals that may arise.
Macy’s reaffirmed its Q1 2024 guidance but said it expects full-year sales to decline between 1-2% on an owned plus licensed basis. The stock initially fell over 5% on the news before recovering some losses.
Breakdown of Layoffs and Potential Impact
The layoffs of 2,350 positions represent about 3.5% of Macy’s total employee base of around 130,000 across its retail stores, supply chain, and corporate offices. While small relative to the overall workforce, it signals Macy’s willingness to make difficult decisions to bolster profitability.
The job cuts appear targeted towards corporate, technology, and back-office roles rather than frontline retail workers in stores. Specific positions impacted are expected to include:
- Buyers / Planners
- Finance / Accounting
- Marketing / Advertising
- Human Resources
- Information Technology
- Supply Chain / Logistics
Several sources noted this follows a trend of traditional retail chains looking to eliminate middle management and administrative bloat built up from decades of expansion.
In terms of locations, the layoffs are likely focused on Macy’s sprawling corporate headquarters in New York along with support centers in Cincinnati, OH and Alanta, GA. Major tech hubs could also be impacted.
While eliminating jobs is always difficult, analysts say trimming expenses in low value areas while investing in growth channels like digital will best position Macy’s for the future retail landscape. The company hinted additional optimization of roles within stores is being explored.
5 Stores Slated for Closure
As part of the restructuring, Macy’s confirmed 5 of its retail stores will close permanently in the coming months. The company declined to name the specific locations at this time.
Potential closure candidates based on recent performance include:
|Macy’s Baldwin Hills
|Los Angeles, CA
|Macy’s Laguna Hills Mall
|Laguna Hills, CA
|Macy’s Santa Ana MainPlace
|Santa Ana, CA
|Macy’s New York Mills
|New York Mills, NY
|Macy’s Northtown Mall
The above stores have consistently ranked among the bottom in terms of sales and profitability metrics for the chain. As Macy’s continues to prune its massive footprint built up from decades of growth, analysts say more marginal and redundant stores could soon be on the chopping block.
Nationwide, Macy’s still operates around 500 full-line department stores along with over 300 specialty retail concepts. The company hinted additional optimization of its portfolio is forthcoming to better match customer demand and demographics.
What’s Next for Macy’s?
With key pieces of the restructuring plan now revealed, attention shifts to how successfully Macy’s management can execute on the strategy and return the retailer to consistent growth.
The $100 million in incremental cost savings will put even more pressure on teams to operate leaner and identify efficiencies. Meanwhile, the $75 million tech investment signals ecommerce and digital channels remain a major emphasis going forward.
Specifically, analysts and shareholders will be monitoring:
Ability to drive online sales growth: Macy’s aims to leverage its national footprint to expand delivery and pickup options. The focus is creating a true omnichannel experience. Success here is critical for the future.
Performance of new smaller format stores: The company continues rolling out smaller concept stores located in lifestyle centers. The performace of this new format will influence the reconfiguration of existing stores.
Asset sale opportunities: Macy’s still owns massive amounts of real estate underneath its stores, estimated to be worth $5 billion or more. Further monetization through partnerships or sales remains an option.
Finally, the revelation that Macy’s is open to take-private proposals introduces an entirely new dynamic. While the oft-rumored scenario remains unlikely near term, analysts say certain private equity firms may look to buy the retailer if shares continue to slide.
So in summary – major changes are underway at the storied Macy’s brand as it fights to maintain relevancy amidst the ongoing retail evolution. This week’s restructuring plan is among the most aggressive moves yet by management – but it likely won’t be the last difficult decision required to stabilize the declining fortune of this American icon.
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