Macy's outlines future plans
Closing 100 stores and investing in digital among moves announced by Macy's in order to drive profitable growth and enhance shareholder value
Macy’s, Inc. has outlined a series of initiatives to drive profitable growth, enhance shareholder value and strengthen Macy’s as America’s preferred omnichannel shopping destination.
The company will heighten the Macy’s brand with exclusive products and an improved shopping experience. Plans also include re-creating Macy’s physical store presence as customer shopping preferences and patterns evolve, reallocating investments to highest-growth-potential store and digital businesses, and capitalizing on opportunities within the company’s real estate assets.
“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 Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer.
“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,” says Jeff Gennette, Macy’s, Inc. president, who is designated to succeed Lundgren as chief executive officer in the first quarter of 2017.
“We will continue to carefully analyse consumer shopping patterns and trends, and use data and customer insights as the basis for innovations to drive the business. You can look forward to a company that expedites decision-making, moves faster, and is bolder in its approach to the customer.”
Re-creating the Macy’s Store Portfolio
To close 100 stores
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. 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.
“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 says. “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 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 says.
“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 energised shopping experience in our remaining stores and elevate our total customer experience across all methods of shopping,” he adds.
Improving the store and online shopping experience
Macy’s will invest in improvements in ongoing stores and digital vehicles. 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 programmes 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 its commitment to stores as a critical element of its long-term omnichannel strategy and balance sheet leverage objectives. The company continues to work on plans for optimising its real estate portfolio and intends to continue to capitalise 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.
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 Cincinnati and New York, is one of the nation’s premier retailers, with fiscal 2015 sales of $27.079bn. The company operates about 880 stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy’s, Bloomingdale’s, Bloomingdale’s Outlet, Macy’s Backstage and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com websites. Bloomingdale’s in Dubai is operated by Al Tayer Group LLC under a license agreement.