Macy's on Thursday announced a massive out-of-court restructuring that entails cutting its corporate and management headcount by some 3,900, along with staff reductions "across its stores portfolio, supply chain and customer support network, which it will adjust as sales recover."
The moves will produce some $630 million in annual savings, according to a company press release. This fiscal year alone the company will save about $365 million.
With many stores reopening after being closed March 18 through May 4 due to the COVID-19 pandemic, most remaining furloughed employees will return to work beginning July 5, the company said.
In a statement on the workforce cuts, CEO Jeff Gennette said what many analysts have insisted upon for several years: "We know that we will be a smaller company for the foreseeable future." Notably, however, the announcement didn't include any permanent store closures, another move that some analysts believe is inevitable.
The department store, as part of a pre-pandemic turnaround plan, in February had said that over the next three years it will close 125 stores, mostly anchoring malls, but some analysts even then didn't think that would go far enough to right-size its operations.
The lower costs made possible by the cuts, plus $4.5 billion in previously announced new financing "will also make us a more stable, flexible company," Gennette also said Thursday. The savings is on top of an anticipated $1.5 billion in yearly savings announced in February, which the company reiterated on Thursday should be fully realized by the end of 2022. The restructuring will also cost about $180 million this year, all in cash, with most to be recorded in the second quarter, the company said.
Gennette is toeing a fine line, saying that the pandemic has "significantly impacted" business and that the cost cuts are meant to be in line with "anticipated lower sales," even as he said that "the re-opening of our stores is going well."
The outbreak threw a wrench in the department store's plans for a major turnaround, which entailed not just store closures but also revamping private apparel labels, shifting to off-mall locations and emphasizing off-price and localization.