Macy's will close 150 stores but expand Bloomingdale's and Bloommercury

Macy's said Tuesday it will drastically reshape its strategy and retail footprint, closing about 150 Macy's stores over the next three years while expanding its upscale Bloomingdale's and Bluemercury chains.

The moves mark a bid by the company's new chief executive, Tony Spring, to improve profitability at the largest department store operator in the U.S. and block a potential takeover bid.

It would be the Macy's chain's second-biggest reduction after 2020 and leave the company with 350 stores, slightly more than it had before the pandemic.

Macy's called the planned closings “less productive locations” that account for 25 percent of the company's total square footage but only 10 percent of sales. The company expects to incur costs of $600 million to $750 million by selling these stores and streamlining some of its warehouses.

In a call with analysts on Tuesday, Mr. Spring said.

He said the company will begin notifying workers that day at stores it plans to close. It plans to close around 50 stores this fiscal and the rest by the end of 2026.

Macy's did not identify the locations, but one is the San Francisco store in Union Square, according to Mayor London Breed's office. The store, which has been in the shopping district for generations, will remain open next year as Macy's searches for a new owner for the property, according to the mayor's office.

Bloomingdale's is expected to open 15 locations as Macy's shrinks its retail footprint. Bloommercury, the company's beauty chain, will add 30 stores and remodel others. As of November, there were 58 Bloomingdale's and 158 Bloommercury locations.

“There's less competition out there, but the problem is that it's not clear that the luxury department store really has a bright future,” said David Schwartz, a retail analyst at financial services firm Morningstar. “A lot of luxury labels do their own direct selling.”

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Bloomingdale's e-commerce sales give the company hope that adding stores will boost digital sales in surrounding areas. About 80 percent of Bloomingdale's digital sales are in markets where it has physical stores, it said.

The company will open its smaller-format Bloomingdale's stores — known as Bloomy's — and storefronts over the next three years, Mr. Spring said on the call. In recent years, the company has been opening smaller stores in strip malls than in enclosed malls, which has been losing shoppers. “That's where the whole market is going,” Mr. Schwartz said.

“It makes sense to open Macy's stores in those smaller locations, but is it too late?” he said. “Other companies are already doing the same thing.”

The decision to fix the midmarket Macy's chain, while increasing the presence of luxury chains, Mr. It's a sign that Spring wants to change the company's overall image so consumers see it as a high-profile target. But that doesn't mean the company's stores will become more expensive places to shop.

“I don't believe in paying too much for taste and style; I don't think it should be reserved for the affluent,” said Mr. Vasantham said in an interview on Tuesday. “I think we need to do a better job with our content and our presentation and our marketing so that the customer is attracted to what we're selling.”

Macy's will increase the number of workers in some of its stores, use data to determine appropriate staffing levels and train workers on how to recommend products to shoppers and better assist them in fitting rooms.

After spending four decades at Bloomingdale's, Mr. Spring took the corporate reins at a challenging time. In December, an investor group submitted a bid to take Macy's private for $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, said they could take their offer to shareholders as long as the retailer started sharing non-public information with them.

Activists have nominated nine people to Macy's board. The company said in a statement last week that the activists did not provide financial details and instead chose to launch a proxy contest. On Tuesday, Mr. Spring told analysts that Macy's board was evaluating candidates, but asked that their questions relate only to the retailer's financial results and its announced three-year strategy.

A representative of the investor groups did not respond to a request for comment on Tuesday.

After an initial sales boost from consumer spending on all kinds of goods early in the pandemic, Macy's had a sales slump.

On Tuesday, the company reported earnings for the fourth quarter, which includes the holiday shopping season. Net sales of $8.1 billion were in line with analysts' estimates. Sales at both Macy's and Bloomingdale's were down from a year ago, while sales at Bluemercury rose 2.3 percent — a sign that shoppers continue to gravitate toward beauty and skin care categories.

The company said it will take a $1 billion charge related to restructuring and closing stores. Shares ended the trading day up nearly 3.4 percent.

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Sales have fallen as Macy's struggles to win over the next generation of shoppers and compete in a world geared toward e-commerce.

“Macy's hasn't put its best foot forward to consumers, so consumers have abandoned it and shopped elsewhere,” said Neil Sanders, managing director of research firm Global Data. “This is a turning point for Macy's.”

Mr. Sanders said.

Before he officially took charge, Mr. Vasantham began to make his mark. In January, his outgoing chief executive, Jeff Genette, sent a memo to employees saying the company planned to cut about 2,300 jobs, or 13 percent of its corporate workforce, to better align customer behavior and its resources. To make decisions quickly. The company also said it will close a few stores.

The last major restructuring at Macy's took place in February 2020, when the company said it would close 125 stores and cut 2,000 jobs. Then the pandemic left many stores dark for weeks, forcing the retailer to scramble to improve its website and e-commerce offerings and figure out how to bring people into stores once they reopen.

Mr. Spring said Tuesday that the company will “not bite off more than we can chew” as it manages the remaining Macy's stores. “We will be thoughtful, methodical and dispassionate in our approach,” he said.

J. Edward Moreno Contributed report.

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