More on Macy's
- Macy’s plans to close approximately 125 of its least productive stores over the next three years, including approximately 30 stores that are in the process of closure now. These 125 stores currently account for approximately $1.4 billion in annual sales.
- Across the remaining store fleet, the company is adjusting its staffing with reductions in some stores and increases in others.
- Macy's will launch of the next phase of its Macy’s Star Rewards Loyalty program later this month. Loyalty 3.0 is expected to increase the engagement of occasional Macy’s customers and to bring new customers into the brand.
- John Harper, formerly chief stores officer, has assumed the role of chief operations officer with expanded responsibility for stores, technology, supply chain and brand experience.
- Marc Mastronardi is now chief stores officer, reporting to Harper. Mastronardi was most recently senior vice president of store operations and customer experience.
- Danielle Kirgan, chief human resources officer, is taking on an expanded role as chief transformation and human resources officer. She will lead the company's transformation work.
Macy’s is closing 125 stores in “lower tier" malls and consolidating its offices to New York City and Atlanta as part of a three-year plan to stabilize profitability and position the company for growth.
The streamlining will slash around 9% of its corporate and support function jobs, about 2,000 positions, and make Atlanta, GA, its primary tech hub.
“As far as closing these big stores, it’s inevitable, I don’t’ think it’s that big of a deal,” Sucharita Kodali, VP, Principal Analyst, Forrester, tells RIS.
Macy’s noted that just 150 stores account for about 50% of its 2019 total stores’ sales and “continue to outperform the balance of the fleet.” The department store retailer operates around 680 Macy’s and Bloomingdale’s stores, and 190 Bloomingdale’s The Outlet, Macy’s Backstage, and Bluemercury shops. The 150 stores that account for half of sales have undergone Macy’s “Growth treatment,” which includes physical improvements, as well as investments in merchandising strategies, technology improvements, talent and local marketing. Macy’s said the remaining stores after the planned closures will also undergo this updating, including 100 stores that will be updated in 2020.
"The bottom 80% [of stores] were probably not pulling their weight to begin with, it’s almost negligible they’re closing the stores that they are,” says Kodali, but she questions what will become of the leases and what the next irritation of these c-tier malls will be on the heels of the closings.
As Macy’s pivots to right-size its fleet and invest in its websites and mobile apps, it’s also relocating the macys.com digital headquarters from San Francisco, CA, to New York City, NY, to “allow for better coordination and increased collaboration and better access to Macy’s brand partners,” in the fashion capital.
New York City will become the company’s only corporate headquarters and Macy’s plans to expand its presence in Atlanta, GA, to serve as its primary technology hub, adding positions to its current Johns Creek, GA, facility, as well as opening an office in Atlanta. The company’s CTO Naveen Krishna came on from The Home Depot in 2018 and has been based in be based in John’s Creek, spending time at Macy’s tech offices in San Francisco and Lorain, OH. The company will shutter both those offices, as well as the downtown Cincinnati, OH, headquarters and its Tempe, AZ, customer contact center. It will also consolidate customer service work into its Mason, OH, and Clearwater, FL, facilities.
“We are taking the organization through significant structural change to lower costs, bring teams closer together and reduce duplicative work,” said Macy’s CEO Jeff Gennette. “This will be a tough week for our team as we say goodbye to great colleagues and good friends. The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile and better fit to compete in today’s retail environment.”
Macy’s Polaris strategy
The company’s updated “Polaris” strategy includes it testing smaller format stores located off-mall. The first Market by Macy’s concept store opens in Dallas, TX, on February 6, and will feature a mix of curated Macy’s merchandise and local goods, local food and beverages, and community events. The new format is smaller than an average Macy’s store and will be located off-mall in lifestyle centers. Macy’s launched [email protected]’s in 2018, a retail-as-a-service (RAAS) concept with dedicated space in 13 stores, which leveraged b8ta’s software platform. The company said this year it will rebrand RAAS and incorporating it into the storewide category merchandising strategy.
Macy’s also said it will expand Macy’s Backstage over the next three years, as its off-price stores, Backstage and Bloomingdale’s The Outlet, have been “a highlight” of the company’s performance. This year Macy’s plans to open an additional 50 Backstage store-within-store locations and seven freestanding Backstage stores outside of malls.
“The retailers who win in today’s consumer-driven world will be the ones who understand their physical stores as the ultimate expression of their brand,” said Kate Hogenson, senior loyalty and CX consultant at Kobie. “It’s no longer about matching the nearest traditional competitor; it’s about elevating the in-store experience in a way that provides customers with personalized expertise and an aspirational experience. For Macy’s, this is an opportunity to reshape their physical stores to offer a unique and more immersive shopping experience.”
Macy’s is also reshaping its supply chain, implementing a new private brand sourcing strategy that it expects will reduce costs and improve speed, and redesigning its fulfillment network, which is expected to improve inventory productivity through increased sell throughs and lower markdown rates.
Macy’s said it expects the Polaris strategy to generate annual gross savings of approximately $1.5 billion, which will be fully realized by the end of 2022. It anticipates gross savings of about $600 million for 2020, some of which will flow to the bottom line in order to stabilize operating margin. The company said it will invest some of the savings back into the business, including technology investment focused on analytics and automation that will drive further productivity improvements, as well as investments in the Growth treatment, Backstage, off-mall expansion and continued improvements to the digital business. It expects costs related to the Polaris strategy to be around $450-$490 million.
“The jury is still out on what ultimately happens to Macy’s,” says Kodali. It takes a long time for a retailer to die, she notes, pointing to Sears and JCPenney, and Macy’s is not mired in terrible debt. She also notes that Macy’s holds the enormous asset of the Herald Square store.
“They’re sitting on some of the most valuable real estate in the world and they own it, which is incredibly unique…for now they know what they’ve got.”
“They should be ok for the foreseeable future, right sizing the stores make sense,” she says.