Macy's to close stores, cut jobs amid weak sales
File- This Sept. 17, 2016, file photo shows a Macy's sign being illuminated on a store marquis, in New York. Macy's says it is eliminating more than 10,000 jobs and plans to move forward with 68 store closures after a disappointing holiday shopping season. The department store chain also lowered its full-year earnings forecast. (AP Photo/Mark Lennihan)
Macy’s Inc. will lay off over 10,000 workers this spring, in a massive streamlining of a magnitude not seen at America’s largest department store chain since the Great Recession.
Of the total, 6,200 are management positions. “That is a significant portion of our executive population – 17 percent. It’s a huge cut,” Terry Lundgren, Macy’s chairman and chief executive officer, told WWD.
The remaining 3,900 employees to be let go are in the stores organization, though no customer-facing jobs are being cut, according to Macy’s executives. Macy’s currently has 158,000 employees.
Macy’s will close 63 stores in early spring 2017, and about three dozen others will close subsequently over the next few years, as part of the 100 store closings unveiled last August.
“We looked at every pyramid of the company. We looked at benchmarking. We have been planning this very carefully. This is not something we did quickly,” said Jeff Gennette, Macy’s president, who will in the first quarter of 2017 succeed Lundgren as ceo.
He said the actions being taken will leave Macy’s with the “right tools” and team to fuel its growth strategy for the future.
Macy’s strategy involves rolling out Bluemercury shops, Backstage offprice departments inside its stores, growing its online businesses, and its China business, which is online through Alibaba’s T-mall.
More specifics of Macy’s growth strategy will be disclosed in mid-February when results for 2016 are revealed.
Macy’s is also monetizing much of its real estate, and on Wednesday said it will sell its downtown Minneapolis flagship to 601W Companies, which will redevelop the site. It will no longer operate as Macy’s. The deal is expected to close by the end of this fiscal year. No purchase price was given.
About $250 million of charges, or 50 cents a share, will be recorded in the fourth quarter of 2016. Macy’s said these charges were not included in the second-quarter estimate of asset impairment and other charges related to the 2016 closings.
Macy’s will lose about $575 million in sales in 2017 due to the store closings.
However, the retailer expects to generate expense savings of about $550 million, beginning in 2017, enabling the company to execute growth strategies.
Macy’s comparable sales declined 2.1 percent in November and December 2016. For 2017, the retailer expects comparable sales to follow the same trend.
“It’s never easy to have to let people go. It’s the hardest part of our job,” said Lundgren. “The only thing that helps us get through these challenging moments is recognizing that by doing this, we are preserving tens of thousands of other jobs and that these actions put us in a position for growth and success in the future. We are still a very, very successful and profitable business.”