Steep discounts have not reversed Macy’s declining sales.
As a consequence, yesterday the giant retailer announced it will close 100 stores — or nearly 14% of its fleet — “to focus on its best-performing stores”.
Macy’s currently operates 728 stores, including 675 of its traditional full-price locations. Over the past 6 years, it had already shuttered about 90 stores, but also opened 13 new locations.
Krystina Gustafson reports for CNBC, Aug. 11, 2016, that the company lowered its full-year forecast in May, after reporting its steepest quarterly same-store sales decline since the 2008 recession. At that time, the company had warned that sluggish sales in warm-weather clothing would weigh on its sales and margins in the second quarter, as it would be forced into additional discounting.
Most of the 100 Macy’s stores that are slated for closure will be closed down early next year, with the remainder shutting down as leases and other obligations expire or are waived. The locations of these stores will be released at a later date. Employees impacted by the store closings may be offered positions in nearby stores. Eligible employees who are laid off will be offered severance benefits.
Macy’s President Jeff Gennette said nearly all the stores are cash-flow positive, but “their volume and profitability in most cases have been declining steadily in recent years.” In some cases, the stores are not performing worse than the overall fleet, but their potential value from redevelopment exceeds their value as a retail store. Macy’s will also close a few stores where there is another location nearby.
After these stores close, the retailer will retain a physical footprint in 49 of the top 50 U.S. markets based on population. The company will use the savings from its store closings to focus on its “highest-potential locations,” and invest “more aggressively in digital and mobile,” Gennette said. Macy’s estimates the annual sales volume it would lose from these 100 stores combined is roughly $1 billion after factoring the revenue it expects to retain due to nearby stores and the web.
Macy’s CEO Terry Lundgren told CNBC: “Whenever there’s been a setback in our company, we’ve been first in the industry to take a very aggressive stance at moving us forward. That’s just part of it. By closing 100 stores… we’re getting out in front of this.” Lundgren said he’s confident about consumers’ ability to spend moving forward, pointing to growth in auto sales and home improvement: “This is good news. They don’t need another car. They don’t need to fix their home anymore… So it’s my turn. It’s our turn.”
Blah, blah, blah.
The company announced in June that Lundgren would step down from his role in 2017, and be succeeded by Gennette.
Terry Lundgren has been Chairman, President and CEO of Macy’s, Inc. since 2004, which means he’s totally responsible for these:
- The “dump Donald Trump” campaign, which backfired as 30,000 irate customers cut up their Macy’s cards.
- Putting drag queens in Macy’s 2013 Thanksgiving Parade
- Long before the current rush to let so-called transgenders use women’s dressing and rest rooms, Macy’s already pioneered the policy in 2011, allowing “cross-dressing” men to use women’s dressing rooms (see “I won’t be trying on clothes at Macy’s“).