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Macy’s to close 150 stores in bid to transform brand as Q4, FY sales fall

US department store Macy’s, Inc. has unveiled its new strategic initiative that includes the closure of 150 “underproductive” stores, modernising its end-to-end operations and strengthening the Macy’s nameplate.

The announcement, made by Macy’s, Inc. CEO Tony Spring, which includes a number of store closures, is hoped to “return Macy’s to enterprise growth.”

The strategy, which is called "A bold new chapter" was developed in collaboration with Macy’s, Inc. leadership and is said to be endorsed by its board of directors and informed by extensive customer research. The ultimate aim is to revitalise the Macy’s brand.

The news was announced alongside Macy's Q4 and FY results for 2023, showing a fall in both sales and revenue.

Macy's three new strategic priorities

Strengthening the Macy’s nameplate: Central to this initiative is a customer-centric approach aimed at revitalising the Macy’s brand. This includes enhancing product assortments, modernising the shopping environment for seamless and convenient experiences across channels with a continued focus on digital excellence, closing 150 underproductive locations by 2026 while investing in approximately 350 strategically chosen locations and expanding small-format stores.
Accelerating luxury growth: Building on its leadership position in the luxury market, Macy’s, Inc. aims to further capitalise on the success of Bloomingdale’s and Bluemercury. The plan involves opening new stores and expanding the digital presence of these brands. With 15 new Bloomingdale stores and at least 30 new Bluemercury stores and 30 Bluemercury remodels, are anticipated over the next three years.
Simplifying and modernising end-to-end operations: Macy’s, Inc. plans to streamline its operations, rationalise and monetise the supply chain asset portfolio, improve inventory planning and allocation, and implement scalable technology solutions to enhance efficiency. Across the organisation, Macy’s, Inc. plans to align operations to anticipated future omni-demand and deliver a more efficient operating model that will allow the organisation to better serve customers.

Spring described the strategy as a "strong call to action" challenging the status quo to usher in a more modern era for the department store company, focused on improved shopping experiences, relevant assortments, and compelling value propositions for customers.

Macy's reports falling sales in both Q4 and FY 2023

Macy's reported mixed results for both Q4 and FY 2023. In Q4, net sales were down 1.7% to $8.1bn, compared to Q4 2022. While brick-and-mortar store sales were flat, digital sales decreased 4%.

The department store said sales at its Bloomingdale's brand were down 1.5% on a 13-week basis. It's women's sportswear and its Outlet business reportedly performed well, while menswear and designer handbags were described as "soft".

Reduced delivery expenses helped increase gross margins in Q4, with delivery costs as a percentage of net sales improved 80 basis points compared to the previous year. Macy's says this reflects "better inventory allocation and ongoing efforts to improve the supply chain".

Over FY 2023, digital sales decreased 7% compared to 2022, while brick-and-mortar sales dropped 5%. Gross margin increased from 37.4% in 2022 up to 38.8% in 2023, while Macy's attributed to improved freight costs and lower clearance markdowns.

Delivery expenses also reduced in FY 23, improving by 60 basis points across the whole year after the store reported "improved carrier rates from contract renegotiations".

Macy's chief operating and financial officer Adrian Mitchell said: "The dedicated work of our teams delivered a solid close to 2023 and provides a strong foundation for us to execute A Bold New Chapter."