Macy's on Thursday unveiled staggered plans to open "a majority" of its 775 stores in six to eight weeks, starting with 68 on Monday and 50 more on May 11, CEO Jeff Gennette said during a call with Gordon Haskett Research Advisors.
Based on retailers' experience reopening stores in Asia and Europe in recent weeks, Gennette expects maybe 20% of Macy's normal sales volume at first, as well as slow traffic, but for both to steadily pick up. The company has shifted some stores to online fulfillment, and that will expand.
While a previous plan to permanently close 125 stores over three years "still makes sense for us," executives are mulling whether to close more, or close sooner, Gennette said. "The wind-back is going to be slow," he said of the reopening period. "We're going to emerge out of this a smaller company."
In a presentation released to accompany the discussion Thursday morning, Macy's outlined the conditions under which it will be opening stores.
That includes directives on social distancing and protections like wearing masks, with hand sanitizer stations available throughout stores. But it also means cutting back on some offerings that make store visits more appealing than shopping online, including tailoring services, spa-like services and the use of beauty testers.
Some stores will open only partially, with some space remaining closed, and/or with shortened hours, and all openings are subject to local directives and public health conditions, Gennette told Gordon Haskett equity research analyst Chuck Grom.
"We want the customers to feel like they're entering a safe environment," he said.
But the company is remaining flexible in light of the unprecedented time, its actions dictated by how to stay safe during a pandemic, Gennette said. "Our model is going to be different after Monday," he said. "I'm going to know a lot more [by] about Tuesday next week."
Macy's "digital business has been performing well" and the company has a healthy balance sheet, according to Gennette. "But the business model was not built to withstand store closures for a sustained amount of time," he also said.
CFO Paula Price, who was also on the call, described cash preservation moves, including employee furloughs, executive pay cuts and dividend suspensions, as "intense," but said that as a result the company is "not burning much cash at all," less than $40 million per week on average.
Macy's began the year with "fresh and current" inventory, but the retailer must now grapple with how to manage merchandise meant for spring and summer. Gennette said that in some cases the company extended terms with vendors and in others the plan is to "pack and hold" to next year. Otherwise, the necessary promotions should be a draw, he said. "There's a lot of fashion we have to work through so there's a lot of markdowns that we need to take," he said. "We had clean inventory but still have a lot to deal with."
To the extent that customers did buy in March and April, furniture, kitchenware, beauty, toys and games, and, in apparel, sleepwear, loungewear and activewear fared best, as did, in a surprise, handbags. Dresses and men's career apparel did not. "The more causal the better it sells" right now, according to Gennette.
The company in the past several weeks has increasingly turned to stores for online fulfillment. By Monday, 466 stores will have that capability, and curbside pickup will be expanded as well. Sales online remained weak at the end of March, but April was stronger than expected, he said.
Macy's stores aren't its only operations disrupted by the pandemic. The department store is also faced with how to program its famous July 4th fireworks event and even more famous Thanksgiving Day parade. The holiday parade in particular attracts some three and a half million people to New York City, Gennette said.
"That could be problematic," he said. "We're working through what the country is going through, and how we want to change the narrative of the parade to be reflective of that, but we're committed to both of these events."