Macy’s, trying to escape the fate that has caused one-time retail giants like Barneys and Toys R Us to declare bankruptcy or go out of business, is shutting stores and giving its fashions, flagship and online experience an upgrade.
The retailer gave investors an overview of its plans to boost sales and profits on Wednesday, a day after it announced it would close roughly 125 underperforming stores over three years. It also said it would cut 2,000 jobs to streamline operations.
“We are making deep cuts that impact every area of our business,’’ Macy’s CEO Jeff Gennette said. “These changes are painful, but they are necessary.’’
Macy’s was once the standard-bearer for the elegant American department store but has struggled to stay relevant at a time when shoppers are increasingly doing their buying online.
Among the roughly 125 stores that will be shuttered, 29 were previously announced and are currently in the process of being shuttered.
Slipping sales, closing stores
The stores tended to be in what Macy’s executives deemed to be lower-tier malls, or in urban hubs where there are several competing locations.
“Everyone is competing for the same dollar,’’ Gennette said, noting that malls, like retailers, are battling web-based companies, subscription services and others for shoppers.
But while 40% of Macy’s shoppers first connect with the retailer by going online, stores are still the company’s foundation, Gennette said. Macy’s will maintain some stores in top-line malls, and it’s also expanding its presence outside those centers.
Backstage, Macy’s off-price offering which has typically had a section within larger department stores, is increasingly getting freestanding locations of its own. This year, seven new individual Backstage stores will open.
Macy’s also announced Wednesday that it’s launching Market by Macy’s, a smaller retail space that will feature locally made items and community events like wine tastings along with the retailer’s most popular products. The first will open Thursday in Southlake, Texas.
A new office tower on top of Macy’s New York flagship
Other store changes underway include plans to build a 1.5 million square foot office tower on top of Macy’s flagship location in Manhattan’s Herald Square. And Macy’s “Growth 50” plan, which began revamping the shopping experience and look of dozens of locations in 2018, will be implemented at another 100 stores this year.
Shoppers may also find a more limited selection of mixers and blenders in store aisles, but a wider selection of cosmetics as the retailer pares some categories of merchandise and boosts others.
Macy’s is also trying to appeal more to shoppers under the age of 40 by revamping Style & Co., Inc. and some of its other private brands.
Shoppers will also see some changes when they click on Macy’s website. Sales on the Macy’s mobile app rose 56% last year, and Macy’s plans to improve the online check out experience as well as the speed of its website.
Customers may also get style tips and peeks at new looks from their favorite designers. And they will be able to modify the image of a particular outfit they’re interested in from the neckline to the length of the sleeve.
The various changes aren’t guaranteed to help Macy’s increase revenue and reverse course, some retail watchers say. But they are worth a try.
“Macy’s is doing the right thing by downsizing,” Sucharita Kodali, vice president and principal analyst at Forrester said in an investors note. “It’s sad for the communities that now have a lot of empty real estate in their malls, the landlords stuck with those malls and the employees who will lose their jobs … Whatever it ends up being, Macy’s will be smaller for sure. Hopefully it will be compelling to shoppers too.”