US: Macy’s To Shut 100 Stores, Revamp Outlets

Macy’s has unveiled a series of initiatives that it says are aimed at driving profitable growth and boosting its omnichannel offer. The moves include store closures, an improved product offer, and revamped stores.

The department store giant said it will shut down around 100 of its full-line stores, with most of them set to close in early 2017.  Macy’s currently operates 728 outlets, including 675 full-line locations. It has not detailed which stores are to be shut, saying final decisions are still being made. However, it did note that the stores generated sales of around $1bn.

Macy’s said that the stores have been reporting declining volumes and profitability in recent years, and “do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations”.  It added the move “will result in a more appropriate store portfolio for Macy’s in the longer term and help us to accelerate our progress in building a vibrant omnichannel brand experience.”

The banner also revealed plans to invest in improvements in existing stores and digital platforms.  These include adding new vendor shops inside its outlets via license agreements, increasing the size and quality of staffing, introducing new technology, and creating new in-store events and experiences.

The Macy’s, Bloomingdale’s and Bluemercury channels will also invest in capacity-building for their sites and apps, improvement in natural language search, faster page loading and simpler procedures for placing and fulfilling orders. Additionally, the successful Buy Online Pickup in Store service is being refined to improve speed and convenience.

The announcements came even as it reported that its second-quarter sales fell by 3.9% to $5.87bn, while like-for-like sales were down 2.0%. It attributed this mainly to the closure of 41 stores in the last fiscal year.  The results meant first-half sales were down 5.7% to $11.64bn, with LFL sales 3.8%.

Operating profit for the quarter was down 14.7% to $372m on an underlying basis, resulting in first-half profit falling 21.8% to $661m on the same basis.

Despite the results, CEO Terry Lundgren said Macy’s was “encouraged by the distinct improvement in our sales and earnings trend in the second quarter.”  He said the group was helped by several factors, such as good weather and improved tourist figures.  He added: “We also are pleased that a number of sales-driving initiatives put in place in recent months are beginning to gain traction.”

NAM Implications:
  • This has to be a continuing trend, as online grows at the expense of B&M outlets
  • Only a question of pace…
  • With mature channels more vulnerable…
  • Time to re-audit your routes to consumer, before online really gets serious?