Macy's to shutter 100 stores, stock soars
Macy’s said Thursday that it will close 100 full-line stores by early 2017, targeting locations where the value of the real estate exceeds their value as retail stores. Macy's will announce which specific stores will close at a later date, but said associates displaced by the closings may be offered positions in nearby locations. Eligible full-time and part-time associates laid off due to store closings will be offered severance benefits, the retailer added.
In tandem with the closures, which will winnow the number of Macy's full-line stores to 575, the department store chain pledged to "heighten" its brand with exclusive products and an upgraded shopping experience, adding it will reallocate investments to its highest-growth-potential store and digital businesses.
Macy's said it will invest in capacity-building across its sites and apps, targeting improvements in natural language search, faster page loading and more efficient procedures for placing and fulfilling orders. The company also will overhaul its Buy Online Pickup in Store offering, introduced in 2013, to boost speed and convenience. Macy's stock surged more than 12% higher in pre-market trading following the news, CNBC reports.
In conjunction with the announcment that it will trim 100 stores, Macy's reported second quarter 2016 sales and earnings that beat analysts' expectations. Adjusted earnings were 54 cents per share, on revenue of $5.87 billion; analysts had expected earnings of 45 cents per share on $5.75 billion in revenue, according to a consensus estimate from Thomson Reuters. Same-store sales decreased 2%, beating Retail Metrics' prediction of a 4.4% decline.
Retail Metrics founder/president Ken Perkins said the upbeat report was from a basis that provided a "very low bar."
"We note that both retailers [Macy's and Kohl's] guided FY16 earnings below the current consensus and while revenues and same store sales for both department store chains beat forecasts they were still negative," he wrote in a note to clients Thursday.
Macy's also reiterated its full-year outlook for earnings per share of between $3.15 to $3.40, and a same-store sales decline between 3% and 4%, after slashing them last quarter.
“A number of factors worked in our favor in the second quarter, including a normalized weather pattern, which contributed to a sales lift in our apparel business in particular,” CEO Terry J. Lundgren said in a statement. “We also saw a smaller decrease in tourist spending during prime summer travel months, supported by strengthened promotional events designed to increase customer traffic and conversion. Macy’s first-ever ‘Black Friday in July’ event was a terrific success which drove record store and online sales for a mid-year period.”
Lundgren said that several initiatives to drive sales, including improvements to jewelry departments, athletic wear and its “Last Act” clearance sections, were beginning to pay off.
Lundgren, who transformed Macy's into America’s largest department store chain during his 13 years at the helm, announced earlier this summer that he will resign at the end of March 2017. He will pass the reins to handpicked successor Jeff Gennette as part of a transition plan that included Gennette’s election as Macy’s president in 2014.
Despite Lundgren's many successes, Macy's has struggled to keep pace with changing consumer tastes and shopping behaviors under his watch, losing significant ground to fast fashion upstarts as well as online merchants like Amazon, which is projected to surpass Macy’s as the nation’s largest apparel retailer sometime next year.
Gennette’s promotion was by no means unexpected, and Macy’s board directors accelerated the transition to give him the latitude to begin overhauling the company now, a source familiar with the company told the Wall Street Journal. “[Gennette] is going to make the radical changes” before he officially takes over from Lundgren next year, the source said.
Follow Daphne Howland on Twitter