Dive Brief:

• Macy's is restructuring its upper management teams to "increase the speed of decision making, reduce costs and respond to changing customer expectations." The company said in a call about its fourth quarter and full year earnings report that it will move key leaders into expanded roles. The company will also cut roughly 100 vice president and above jobs effective March 1, according to a company spokeswoman.
• The department store expects the move to generate savings of $100 million beginning this year. The cuts will allow Macy's to redirect those resources toward supply chain efficiency, enhancing inventory management and building a larger customer base.
• The company reported its fifth consecutive quarter of positive comp sales; Comps rose 0.4% for the quarter on an owned basis and 0.7% on an owned-plus-licensed basis. Fiscal 2018 also marked the first year since 2014 that Macy's notched positive quarterly comps all year; comps grew 1.7% on an owned basis and 2% on an owned and licensed basis. Net income in the fourth quarter reached $740 million, down from $1.35 billion a year ago. 

Dive Insight:

Macy's fared better for the year than many expected after a dismal holiday report came out last month. That's in part due to two main events that had a combined impact of as much as 70 basis points, CEO Jeff Gennette said during a conference call Tuesday morning. The first was a Nov. 24 fire in a West Virginia megacenter, which caused a portion of merchandise inventory not to be available during cyber week. Secondly, Gennette acknowledged that the company's decision last year to only open its pre-Christmas sale to loyalty members alienated new customers. Executives will reverse that decision this coming year, he added.

Looking ahead at 2019, Macy's expects its comps to remain flat to up 1% on the year. To Neil Saunders, managing director of GlobalData Retail, that indicates that Macy's hasn't yet come to grips with many of the issues plaguing its stores.

The company says its Growth50 initiative to improve facilities, fixtures, assortment and customer service in 50 stores has begun to pay off; the stores outperformed the rest of the fleet and led to higher customer retention and brand attachment. But, Saunders said, it's not enough to drive sales.

"We recognize, and accept, that Macy's cannot refurbish all stores at once. However, we would argue that many of the failings are basic and can be remedied by better shop keeping standards and store management disciplines — things that take effort but cost little," he said in emailed comments to Retail Dive. This year, Macy's will add those improvements to another 100 stores.

Overall, Gennette said the company's "North Star Strategy" is working. The turnaround plan has five main pillars, including loyalty, which got a makeover last year. Improved benefits led to a 10% bump in platinum member spending. The company also opened more than 120 new off-price Backstage shop-in-shops, which provided an average lift of 5% to stores. The company also found that 15% of customers shop both the main store and the off-price unit, executives said during a conference call with analysts.

This year, Backstage will open at 45 stores and vendor direct will continue to be a priority for "aggressive expansion." The department store will also double the number of Market @ Macy's locations, all of which will be powered by the b8ta platform. Macy's invested in the tech company last year. It will also expand its virtual reality furniture program.

Macy's will also add two new key initiatives to its overarching plan: a mobile-first strategy and and investment in specific categories that are anticipated to drive growth (dresses, fine jewelry, big ticket, men's tailored, women's shoes and beauty).

Despite a weak holiday, Macy's made progress on operational and customer experience improvements, according to Christina Boni, Moody's Investors Service vice president and senior credit officer. In comments emailed to Retail Dive, she said that its off-price Backstage business and growth investment model are key to Macy's stores. "Macy's continues to increase productivity throughout its business with $100 million in saving identified for this year. Debt reduction remained a priority, with over $1.1 billion repaid in 2018," she said.

Macy's should get credit for positive comps, but there are a number of nuanced points that remain troubling to Saunders. "First, Macy's full year growth was achieved against the backdrop of a very strong consumer economy. Second, despite its various initiatives, Macy's still lost market share across all of the categories in which it trades. Third, the fourth quarter numbers represent a worrying material slowdown in the pace of advance," he said.