When Tony Spring took over as CEO, the store closures of 150 Macy’s outlets were not among the changes we were expecting at the company. From the outside, the mere size of the department chain might have led us to believe that business was booming but Macy’s survival relies on making some shrewd decisions to cut costs and reorganize resources strategically to make room for better investments. Macy’s CEO highlighted that the company had “too many locations that were built for a different era,” and closing some of the non-productive outlets was going to help the business to thrive.
A Quick Glance at the Circumstances Behind Macy’s Store Closure Plans
Making difficult decisions is part of a CEO’s daily routine but the plans behind Macy’s store closures must have caused those in the room to break a sweat. Macy released its Q4 2023 Earnings report on February 27, 2024, which detailed their current standing and their action plan for the future. The report indicated that at the end of Q4, Macy Inc. had 502 Macy’s stores, 57 Bloomingdale’s stores, and 159 outlets for their Bluemercury brand. With 718 stores to organize, it’s possible that some stores that were unable to bring in the expected revenue have slipped under the radar in the last few years.
The 150 store locations that have been identified for the shutdown represented 25 percent of Macy’s Inc. FY23 gross square footage, but only 10 percent of its sales. By closing these non-go-forward stores, the company expects $500M to $650M USD in sales proceeds and asset sale gains of about $250M to $350M USD. These big numbers could easily fuel the investments the company is looking to make in its other stores.
Exploring Macy’s Net Sales and Revenue
Macy’s net sales were reported at $23,092 billion USD with a 5.5 percent decline from FY22. Digital sales decreased by 7 percent compared to 2022, while brick-and-mortar sales went down by 5 percent. Macy’s reported a 6.9 percent decline in comparable sales of its owned stores and a 6.9 percent decline in its owned-plus-licensed stores. This indicates a decrease in sales volume for Macy’s overall operations.
Macy’s reported other revenue of $774 million USD, which is $233 million USD lower than in 2022. This decrease indicates that Macy’s earned less money from sources outside of its main retail business as compared to the previous year. The decline in other revenue was linked to higher credit losses in the company portfolio, which caused the decline in total sales percentage represented by non-retain income.
The Macy’s nameplate undoubtedly has the company’s biggest customer base with 41.2 million active customers this year. In comparison, 4.0 million active customers shopped the Bloomingdale’s nameplate and 711 thousand active customers shopped for the Bluemercury nameplate. Considering the more premium nature of Bloomingdale’s and Bluemercury, the more reasonable Macy’s brand is the one that has been leading the business in terms of the bulk of sales, but this might soon change as the company gets set to invest more heavily in its premium labels.
What Does Macy’s CEO Have Planned For the Future of the Company
Along with the fiscal report, the company also introduced the “Bold New Chapter” in the company strategy, which includes the plan for Macy’s store closures. The company seems to have a staggered plan for the shutdowns, with 50 stores set as the target for the end of 2024. By 2026, the company aims to bring down Macy’s numbers to 350. In addition to store closures, Macy’s survival plan also includes a more narrowed focus on building up the Bloomingdale’s and Bluemercury brands with increased physical outlets.
Macy’s CEO Tony Spring is looking to balance Macy’s survival with the growth of the luxury brands and there is a very specific plan of action in mind. The company will open over 15 new Bloomie’s and The Outlet locations through FY26 and increase its digital presence simultaneously to capitalize on all available markets. Bluemercury will receive similar treatment with at least 30 new locations through the fiscal year 2026, and around 30 existing stores could also see remodeling efforts to improve the store’s appeal.
There are other backend changes that will follow in line with the Macy’s store closures, aimed at modernizing the end-to-end operations at the company. This should help the company’s supply chain keep up with the demands of their in-store needs while also improving the overall quality of their product line.
Macy’s Competitors See An Opportunity Present Itself
The scale of the Macy’s store closures feels excessive but an essential consideration here is that the company isn’t making the move due to operational difficulties—opening up new retail outlets is as much a part of the plan as the closing of its stores. Still, if the more mid-priced Macy’s outlets are being replaced by premium tier ones, competitors offering affordable prices to their customers could stand to benefit from the new plan. CNBC reported that Target CEO Brian Cornell and Kohl’s CEO Tom Kingsbury foresaw Macy’s closing stores as a chance for them to boost their own sales in the process.
The news page hypothesized that retail chains like T.J. Maxx, Ross, and Nordstrom could also benefit from the shutdown considering these brands shared customers and those who can no longer find a Macy’s near them will walk into these competitor stores instead. These alternate brands could also open up their own stores in former Macy’s locations, creating another opportunity for customers to choose them. Reports indicate that the Macy’s shutdown could hand out over $2 billion in market shares to those who manage to capitalize on it.
The Macy’s store closures could face some setbacks before the company’s asset sale gains pan out completely, but for the most part, the strategy appears rightly aimed towards the business rearranging its assets. Competitors will undoubtedly stay on high alert as the store shutdowns begin.
