Macy’s Inc. has announced big moves to shore up its brick-and-mortar business and refocus its digital efforts. On Thursday, the Cincinnati-based retailer disclosed plans to close 100 Macy’s stores, re-evaluate some larger flagship leases and also double down on its digital strategy.
“The announcements we are making today represent an advancement in our thinking on the role of stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth,” said Jeff Gennette, Macy’s Inc. president. “In the short term, our company’s top line sales will be somewhat smaller, but the changes being made will position us to grow comparable sales more quickly and generate a level of profitability that stands out among retailers.”
The company said it was making its digital presence and better in-store experiences a top priority moving forward. In addition, it would add new shop-in-shops to its department stores, as well as expand the My Stylist personal shopping service and emphasize more in-store events and experiences to better connect with shoppers.
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Creating a new in-store experience has been a top challenge for many traditional retailers, Macy’s included, and one that analysts have long been telling stores to focus on. As millennials move to becoming top shoppers, stores have been trying to find new ways to bring this mobile-first, online and value-seeking generation into their physical locations.
In recent years, Macy’s has revamped its digital presence in stores with initiatives including in-store beacons and most recently a smart-shopping app collaboration with IBM’s artificial intelligence computer Watson. To further push a digital and connected focus, Macy’s and Bloomingdale’s will be expanding the Buy Online, Pickup In Store program, as well as update its website and apps.
Additionally, the brand said it was re-evaluating its real estate investments. Macy’s is closing 100 stores across the U.S. that had long been unprofitable, or the real estate value was more than that of the store. The brand’s store total sits at 728 locations; the closures are expected to be finalized in the first part of 2017.
These upcoming closures follow a major move Macy’s announced last year to close 40 stores. Macy’s said it would aim to transfer associates to other stores, and offer severance packages to eligible associates.
“We believe that this reduction of 100 locations in the short term 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,” said Gennette, who is set to succeed CEO-chairman Terry Lundgren as CEO in the first quarter of 2017. “With this strategy, we will be able to reinvest in a more energized shopping experience in our remaining stores and elevate our total customer experience across all methods of shopping.”
Four flagship stores are also being re-evaluated, and talks are underway to sell the Macy’s Men’s Store in Unique Square in San Francisco.
Analysts and shareholders seem to be pleased with the moves. For the first time in several quarters, Macy’s reported better-than-expected sales, positive comparable store sales and profits that beat street expectations in Q2 results, which were announced on Thursday. Share prices jumped at the opening bell as much as 16 percent.
