The department store's shares dropped over 9 percent following the market's close Wednesday after it posted disappointing holiday sales and released the locations of 68 stores it plans to close nationwide as it aims to turn its fortunes around.
Macy's comparable sales tumbled over 2 percent in November and December; it expects full-year diluted earnings to be in a range of $2.95 to $3.10 -- considerably lower than the $3.15 to $3.40 it was hoping for.
In an effort to cut costs and streamline operations, Macy's said it will eliminate layers of management and will work to reduce other non-payroll costs. As a result of these steps, the company expects its work force will shrink by 6,200.
Plus, some 3,900 workers will be displaced by the store closures and some of these employees may be reassigned.
The store closures reflect an attempt to reverse slumping sales at its established shops, with the department store chain striving to focus its efforts on its best-performing locations and website.
As part of a strategy to streamline its portfolio, Macy's moves will save the company an estimated $550 million a year beginning in 2017. The company will use these proceeds to invest an additional $250 million in its digital business and other ventures.
Fellow department store chain Kohl's also lowered its forecast for 2016 in light of soft holiday sales. Its comparable sales also fell 2.1 percent in November and December.
The weak showing at the department stores came despite recent reports that the industry's holiday season was expected to top previous estimates. Much of that success was fueled by strong online sales growth and a flurry of last-minute purchases.
Of the 68 stores Macy's is shuttering, three were closed mid-year, 63 will be closed in early spring, and two will be closed in the middle of the year. Three other locations were sold, or will be sold, and are being leased back.
The company will close about 30 additional stores over the next couple of years as leases or operating covenants expire or sale transactions are finalized.
Meanwhile, Macy's plans to open roughly 50 new Backstage locations inside existing Macy's stores, and about 50 Bluemercury specialty stores. Those shops will be both freestanding and within existing Macy's stores.
I often shop at Macy's whenever I want to buy clothing. They seem to offer every brand under the sun -- from Michael Kors and Alfani to Lacoste. But there's no question Macy's is not the top choice among budget-conscious consumers. Despite offering year-round discounts on everything from clothes to towels, its stuff tends to be on the pricey side.
I think the retailer ought to carry -- and market -- items that still fall within the price range of thrifty shoppers as well as those who may not have deep pockets. Maybe advertising "one-day sales" just doesn't cut it anymore.
How often -- if ever -- do you shop at Macy's? Are you surprised to see the store struggling?
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