Macy's to close 100 stores

Mike Mozart / CC BY 2.0

Macy's (NYSE:M) is closing stores and reallocating resources as the retailer attempts to stave off deteriorating sales and better position the chain as mall traffic declines.

The plan is to close roughly 100 locations, or 15 percent of its store base, in early 2017. Most locations are currently cash flow positive, but have seen declining volume and profitability in recent years, said Jeff Gennette, Macy's president, who has been designated to succeed Terry Lundgren as CEO in 2017.

The real estate value of some locations exceeds the value of the store itself. The locations have not been identified.

The 100 stores have combined annual sales of roughly $1 billion, which is expected to be captured by nearby stores and online.

"We recognize that these locations do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations for the Macy's brand," said Gennette in a statement. "We decided to close a larger number of stores proactively so we can invest in a winning customer experience in our most productive and highest-potential locations, as well as invest in growth sooner and more aggressively in digital and mobile."

Macy's will continue to grow its stores within stores including Bluemercury and beauty departments, as well as the My Stylist personal shopping services. More investment will be made in digital platforms, including mobile apps and fulfillment.

Downtown flagship locations represent strong real estate opportunities for Macy's, and the company is in negotiations to sell its Men's Store on San Francisco's Union Square after integrating that concept into the larger Macy's store across the street.

The store closings were announced in conjunction with Macy's second quarter sales and earnings, which declined. Still, the company is beginning to see positive results from some of the programs targeted for investment.

"The announcements we are making today represent an advancement in our thinking on the role of stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth," said Gennette. "You can look forward to a company that expedites decision-making, moves faster, and is bolder in its approach to the customer."

By the end of 2017, Macy's will be a smaller company with a stronger digital presence.

For more:
- see this Macy's earnings release
- see this Macy's press release

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