Macy’s to cut jobs, shut 63 stores amid weak Christmas sales

Macy's has announced that its comparable sales on an owned plus licensed basis declined by 2.1 percent in the months of November and December 2016 combined, compared to the same period last year. On an owned basis, comparable sales declined by 2.7 percent in the combined November/December period. In a separate release, the company also announced measures to boost sales that include the closure of 63 stores in 2017.

"While our sales trend is consistent with the lower end of our guidance, we had anticipated sales would be stronger. We believe that our performance during the holiday season reflects the broader challenges facing much of the retail industry," said Terry J. Lundgren, Macy's Chairman and CEO in a statement.

Macy’s to shut stores, cut jobs to boost sales

Macy's has announced a series of actions to streamline its store portfolio, intensify cost efficiency efforts and execute its real estate strategy. The actions include, closure of 68 stores and the reorganization of the field structure that supports the remaining stores, reinforcing the strategy of fewer stores with better customer experience. These store closures are part of the approximately 100 closings announced in August 2016.

The company said that the actions announced today are estimated to generate annual expense savings of approximately 550 million dollars, beginning in 2017, enabling the company to invest an additional 250 million dollars in growing the digital business, store-related growth strategies, Bluemercury, Macy's Backstage and China.

"Over the past year, we have been focused and disciplined about making strategic decisions to position us to gain market share and return to growth over time. We continue to experience declining traffic in our stores where the majority of our business is still transacted. Given the overall trends challenging us and the broader retail industry, and the time needed to execute new strategies, we expect our 2017 change in comparable sales to be relatively consistent with our November/December sales trend," added Lundgren.

Of the 68 stores, three closed mid-year, 63 will be closed in early spring 2017 and two will be closed in mid-2017. Three other locations were sold, or are to be sold, and are being leased back. The company intends to opportunistically close approximately 30 additional stores over the next few years as leases or operating covenants expire or sale transactions are completed. As a result of closing 63 Macy's stores in early 2017, along with the three closed mid-year 2016, the company's 2017 sales are expected to be negatively impacted by approximately 575 million dollars. The company estimates that 3,900 associates will be displaced as a result of these closures.

Four new Macy's and Bloomingdale's stores are currently planned and/or under construction, as previously announced. In addition, new Macy's and Bloomingdale's stores are planned to open in Abu Dhabi, and one Bloomingdale's store is planned to open in Kuwait, all under license agreements with Al Tayer Group. The company also plans to continue its expansion of Macy's Backstage (within Macy's stores) and Bluemercury (freestanding and within Macy's stores).

Restructuring exercise to impact 6,200 employees

The company said, other measure like restructuring its central organization with a focus on eliminating layers of management to reduce costs, intensifying efforts to reduce non-payroll costs companywide by achieving lower pricing and reducing consumption to deliver sustainable savings and making changes to the way stores are operated and reducing field infrastructure given the reduced store sales and evolving customer behaviour will result in a headcount reduction of approximately 6,200.

However, the company has maintained its previously provided full-year sales guidance of a 2.5 percent to 3 percent decrease in comparable sales on an owned plus licensed basis, and expects to come in at the lower end of that guidance, with comparable sales on an owned basis to be approximately 50 basis points lower.

The company now expects full-year 2016 diluted earnings per share (excluding asset impairment, restructuring, retirement settlement and other charges) to be in a range of 2.95 dollars to 3.10 dollars compared with previous guidance of 3.15 dollars to 3.40 dollars.

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