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01/12/2016

Macy's to Close 40 Stores and Layoff Thousands as Sales Continue to Slump

In response to slipping sales and plummeting stock value Macy’s announced a series of cost-cutting and process improvement measures to reduce expenses. The layoffs, store closings, and process improvements are expected to reduce operating costs by approximately $400 million while still allowing the department store chain to invest in growth strategies, particularly in omnichannel capabilities.

"In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations," Terry J. Lundgren, chairman and CEO, Macy’s said. "Moreover, we believe we can operate more effectively with an organization that is flatter and more agile so we can pursue growth and regain market share in our core Macy’s and Bloomingdale’s omnichannel businesses faster and with more intensity. We will continue to invest in strategic initiatives that anticipate emerging customer needs and create shareholder value."

To reach its goal of cutting costs while remaining an innovative leader Macy's announced the following changes will be implemented in early 2016:
  • Closing of 40 Macy’s stores. Of the 40, 36 will be closed in early spring 2016, while the other four stores were closed in the final three quarters of 2015.
  • Consolidating the grouping of existing Macy’s stores into five regions and 47 local districts (down from the current structure of seven regions and 58 local districts).
  • Adjusting staffing levels at each Macy’s and Bloomingdale’s store in line with current sales volume to increase productivity and improve efficiency. An average of three to four positions will be affected in each of Macy’s and Bloomingdale’s approximately 770 stores.
  • Implementing a voluntary separation opportunity for about 165 senior executives in Macy’s and Bloomingdale’s central stores, office and support functions who meet certain age and service requirements. Approximately 35% of these executive positions will not be replaced.
  • Reducing an additional 600 positions in back-office organizations by eliminating tasks, simplifying processes and combining positions, with about 150 of these associates reassigned to other positions.
  • Consolidating the four existing Macy’s credit and customer services center facilities into three.
  • Decreasing non-payroll budgets companywide in areas such as travel, meetings and consulting services.
“The cost efficiencies represent more than two-thirds of our goal of annual SG&A expense reduction of $500 million, net of growth initiatives, from previously planned levels by 2018," Lundgren said. "In some cases, there will be short-term pain as we tighten our belt and realign our resources. But our eye is on a long-term vision of Macy’s, Inc. as a dynamic retailer that serves existing customers and acquires new ones through innovative approaches to the marketplace."