Amid financial difficulties, the American department store chain Macy's, which has welcomed a new Chief Executive Officer (CEO), is set to undertake a large-scale store closure. Over the next three years, it plans to shut down 150 stores, equivalent to 30% of its total department stores, and instead open smaller stores focused on high-end luxury product lines.
According to the New York Times (NYT) and others, Tony Spring, the new CEO, announced on the 27th (local time) a restructuring plan to close 150 Macy's stores, representing 30% of all stores, based on sales performance. Fifty stores will be closed by the end of this year, with the remaining stores to be closed by 2026. As a result, by 2026, only about 350 stores will remain nationwide in the U.S.
CEO Spring described this restructuring as "A Bold New Chapter," emphasizing, "We need to focus on securing the best stores, not the most stores. This is not a business downsizing but a reorganization of the business portfolio." Although specific stores slated for closure were not disclosed, flagship stores such as the San Francisco Union Square location are considered targets. The NYT reported that these stores account for 25% of Macy's total store area but only 10% of sales.
Instead, Macy's plans to expand smaller stores selling high-end products in busy commercial districts rather than large shopping malls. The currently well-performing Bloomingdale's and beauty chain Bluemercury plan to open 15 and 30 new stores, respectively. As of November last year, Bloomingdale's had 58 stores, and Bluemercury had 158 stores. CEO Spring explained, "Opening (profitable) smaller stores is the direction the entire industry is heading." Additionally, Macy's will strengthen its private label products and streamline its supply chain.
Known for hosting the annual Thanksgiving Day Parade and Independence Day fireworks in New York, Macy's has long been regarded as a symbol of the American middle class. However, with the rise of online shopping and e-commerce companies like Amazon, Macy's has experienced a decline in recent years. Last year, it was even considered a "leftover" asset after receiving a $5.8 billion acquisition offer from real estate investment firm Arkhouse and others. Activist investors previously pushed for a spin-off sale focusing on Macy's real estate assets.
In this context, the current restructuring plan is essentially Macy's move to counter activist investors and boost sluggish sales and stock prices. Local media have particularly noted that Spring, a former Bloomingdale's executive who took office earlier this month, has shown a bold approach by signaling restructuring even before his official inauguration. The NYT evaluated, "Macy's management is showing efforts to solve problems to investors who had been frustrated by weak profits." CNN described it as "a turnaround strategy reflecting changes in retailers and American shoppers." On the day of the announcement, Macy's stock closed up 3.37% on the New York Stock Exchange, buoyed by expectations for the restructuring.
However, questions remain about expanding stores focused on luxury product lines. David Schwartz, an analyst at financial services firm Morningstar, told the NYT, "Competition may be less intense, but the future of luxury department stores is uncertain," pointing out that "many luxury brands are selling directly."
Macy's also released its fourth-quarter results on the same day. Fourth-quarter net sales were $8.1 billion, meeting Wall Street expectations, representing a 1.7% decrease compared to the same period last year. Net loss was $71 million, a turnaround from a net profit of $508 million in the same period last year. Macy's confirmed that the restructuring and store closures will cost $1 billion. The company expects this year's sales to decline by 1-4% compared to last year.
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