LAS VEGAS — With fresh leadership in place, Macy’s is executing on a transformation plan announced earlier this year.
The 150 Macy’s stores slated for closure in the next three years make up 25% of the banner’s square footage but represent less than 10% of sales, CEO Tony Spring said during a discussion at Shoptalk on Sunday.
The retailer has “too many locations that were built for a different era,” Spring said, adding that the company has “no choice” but to close stores if it wants to thrive and not just survive.
As of Feb. 3 — a couple of weeks ahead of the latest store closing announcement — Macy’s Inc. had 718 stores across its portfolio, which in addition to its namesake banner includes Bloomingdale’s and Bluemercury. The breakdown at that time was 502 Macy’s, 57 Bloomingdale’s and 159 Bluemercury locations. The Macy’s banner had about 101 million gross square feet; overall the company said it had 101.3 million square feet.
“Of course, we're very sensitive to the impact a Macy’s closure has on our colleagues, our customers, our vendors and the local community,” Spring said. “But this is a critical step as we move forward. This isn't about shrinking. It's about improving historically, to make sure that we're giving people the opportunity to shop the way they want.”
The department store sector remains challenged, with competition heating up from off-pricers and digitally native brands, Spring said. “The weekday trips to the mall are just not as common or as frequent,” he said. “And yes, we all need to invest more in our stores. On top of that, digital disruption has forever changed the way people think about the business.”
Despite this, the Macy’s brand remains highly recognized and retains consumer goodwill, Spring said, noting that the retailer is part of key moments in people’s lives, like buying a prom dress or suit or building a wedding registry.
Spring, who took over as CEO last month, previously led Bloomingdale’s. He plans to apply learnings from his time at that banner as he leads the transformation across the company.
As part of an earlier turnaround for that banner, Spring said Bloomingdale’s expanded its luxury offerings, improved the quality of its assortments and decluttered the sales floor. It also brought more events into the store and “added a little more theater to the business,” he said. Spring said those efforts at Bloomingdale’s increased brand equity and helped it attain high net promoter scores, which measure customer loyalty and enthusiasm.
"What we did at Bloomingdale's provides a roadmap for what we can do at Macy's," Spring said.
An additional element of the company’s turnaround strategy is simplifying and modernizing the supply chain and inventory management by ensuring that inventory is allocated more effectively to all channels.
“One of the worst feelings is walking into a store or shopping online and not being able to get the size and color you’re looking for in the time of need,” Spring said. “We know we have to get allocation by channel right and we feel confident we can.”
The department store’s Bold New Chapter turnaround plan will rely heavily on supply chain changes that should deliver $100 million in cost savings this fiscal year. They include closing distribution centers, increasing automation and other strategies to improve inventory, productivity and sales.
The department store is working through its transformation plan as it faces interest from investors in the form of takeover bids, which Macy’s has previously rejected. Earlier this month, Arkhouse Management and Brigade Capital Management upped their previous acquisition bid by $800 million, pushing it to $6.6 billion. Arkhouse Management and Brigade have also set up a proxy fight, with nine nominations to the retailer’s board.
