Macy’s announced major cost-cutting measures this week in an effort to turn around sluggish sales trends, including thousands of job cuts and the closure of several underperforming stores.
Macy’s to Eliminate Over 2,300 Positions
On Wednesday January 18th, Macy’s revealed plans to eliminate over 2,300 corporate and management positions as part of a significant restructuring initiative led by new CEO Jeff Gennette. This represents approximately 3.5% of Macy’s total workforce.
The job cuts will be concentrated in the retailer’s corporate offices, though some management-level cuts are expected at the store level as well. Most of the reductions will take place over the next few weeks.
In a statement, Gennette said the layoffs are necessary “to align our cost base with our anticipated lower sales and profits for 2023.”
Macy’s is aiming to save $100 million annually through this round of job cuts and other cost reductions across the organization. The savings will help Macy’s invest further in omnichannel initiatives to improve convenience and personalization for shoppers.
Five Macy’s Stores Slated for Closure
In addition to the job cuts, Macy’s said it will permanently shutter five stores across four states by the middle of 2023.
The closures include:
- Vista Plaza in Los Angeles, CA
- Cape Cod Mall in Hyannis, MA
- Santa Rosa Plaza in Santa Rosa, CA
- Santa Barbara downtown store in Santa Barbara, CA
- Greenwood Mall in Bowling Green, KY
Liquidation sales will begin immediately at the affected stores. All five locations are expected to cease operations over the next two to four months.
Approximately 190 employees will be impacted by the store closures. Macy’s said it will work to place as many affected staffers as possible in nearby stores.
Macy’s Continues Multi-Year Decline
The latest restructuring actions cap off a difficult 2022 holiday season for the embattled department store chain.
Comparable sales at owned and licensed stores dropped 9.8% in November-December compared to the previous year. Digital sales also retreated 9% over the holidays amid consumers cutting back discretionary purchases.
Overall, Macy’s sales momentum has steadily eroded since 2018 due to changing consumer preferences and stiffer competition:
| Year | Total Sales Growth |
|---|---|
| 2018 | +4.3% |
| 2019 | -0.5% |
| 2020 | -29.5%* |
| 2021 | +41.0%** |
| 2022 | -6.1% |
*Pandemic-related temporary store closures significantly impacted 2020 results
**2021 recovery off depressed 2020 baseline
To revive sales growth, Macy’s continues shifting towards smaller-format stores located outside traditional malls. The company is also expanding its off-price Backstage store-within-store concept to more locations after positive early results.
However, analysts say much more substantive changes are still required for Macy’s to succeed over the long-run, such as further rightsizing its sprawling real estate footprint and accelerating investments into personalization capabilities.
Activist Investor Pushes Macy’s To Go Private
As Macy’s financial struggles mount, activist investment firm Jana Partners has built up a sizable stake and is urging significant changes at the retailer.
Most notably, Jana believes Macy’s would perform better in the current retail climate as a private company without the pressures of quarterly financial disclosures and volatile public stock moves.
Going private would provide Macy’s the time and flexibility to focus more intently on transforming merchandising, stores, supply chains and technology over a 3-5 year period out of Wall Street’s microscope, Jana contends.
Jana has held talks with banks and private equity firms to help finance a potential Macy’s buyout deal, according to sources familiar with the discussions.
However, some analysts are skeptical about whether a deal to take Macy’s private is feasible given the company’s still-massive scale, expensive real estate portfolio, heavy debt load and uncertain turnaround path.
Macy’s management has not yet commented publicly about the possibility of going private.
Outlook: More Changes Ahead For Macy’s
With sales trends weakening, profits declining and pressure mounting from activists, most experts believe Macy’s will need to make additional tough decisions throughout 2023 to cut expenses and better position itself for an eventual rebound.
Further job reductions, real estate downsizing, inventory clearance markdowns and asset sales could all be on the table as management scrambles to improve results. More store closures are considered likely as well.
Macy’s still retains significant brand equity and customer loyalty stemming from its long history as an iconic American retailer. But the next 12-18 months appear poised to be a crucial tipping point that determines whether Macy’s can evolve to be viable and vibrant for the future.
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