Amid the shift to online shopping that has made operating a vast portfolio of brick-and-mortar sites less lucrative, Macy’s said Thursday it will close 100 stores by early 2017, or nearly 15% of its current 728 locations. Macy’s had said in May that it expects revenue at stores, including business from licensed departments, open at least a year to be down 3 percent to 4 percent.
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Macy’s officials said they would name locations at a later date, but they didn’t know when that would be.
Shares of the company, which also reported a smaller-than-expected drop in quarterly sales at established stores, were up 11 percent at $37.79 in premarket trading on Thursday.
“Macy’s needs to create an atmosphere where customers want to come to their stores”, said Stuart Appelbaum, president of the union, which represents 8,000 Macy’s and Bloomingdale’s employees in the NY metro area.
Slimming down the 748-store count by 14 percent is a key part of Macy’s turnaround strategy, which also includes leveraging its significant real-estate assets. Officials anticipate these volumes will transfer to other stores and online sales. Numerous stores will close in early 2017, with the balance closing as leases or other agreements expire or are amended.
Associates in these stores will be notified prior to any public announcement, according to company officials.
Macy’s estimates the sales decline from the loss of those stores will cost it as much as $1 billion next year. If that happens, the Men’s Store would not close until a new men’s department is open.
The company also wants to continue the annual double-digit growth it has seen digitally for the last 15 years.
The company plans to boost investment in remaining stores and upgrade its mobile applications to allow easier search, faster page loading and simpler procedures for placing orders.
“Customers almost everywhere in America will have easy access to Macy’s stores, with the additional convenience and increased functionality of our dynamic digital offering”, Gennette said.
Certain employees would receive severance pay, the company said.
“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”, said Terry Lundgren, chairman and chief executive officer of Macy’s, in a statement.
More consumers prefer to buy online particularly at Amazon.com which leave conventional retailers hard-pressed to cope with sales.
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Fiscal 2015 sales were reported at $27 billion. In addition to the announced closure of 175 North American stores in 2015 and the 53 Old Navy subsidiary stores in Japan and 20 global Banana Republic stores already announced in 2016, Deutsche Bank analyst Paul Trussel believes another 175 North American stores need to be shuttered to help make the store competitive.
