Macy's will close 150 stores but will expand Bloomingdale's and Bluemercury

Macy's said Tuesday it will significantly reshape its retail strategy and footprint, closing about 150 Macy's stores over the next three years while expanding its upscale Bloomingdale's and Bluemercury chains.

The moves put the stamp of the company's new CEO, Tony Spring, on his efforts to improve the profitability of the largest U.S. department store operator and stave off a potential takeover attempt.

This is the second major downsizing for Macy's since 2020, and will leave the company with 350 stores, just more than half the number it had before the pandemic.

Macy's said the “non-production locations” it planned to close represented 25 percent of the company's total footprint but only 10 percent of sales. The company said it expects to generate between $600 million and $750 million by selling these stores and streamlining some of its warehouses.

“We have to focus on having the best stores, not the largest number of stores,” Spring said on a call with analysts on Tuesday.

The company said it would begin notifying workers later that day at stores it plans to close. It plans to close approximately 50 stores this fiscal year and the rest by the end of 2026.

As Macy's reduces its retail footprint, Bloomingdale's is expected to open 15 locations. The company's cosmetics chain, Bluemercury, will add 30 stores and redesign others. As of November, there were 58 Bloomingdale's locations and 158 Bluemercury locations.

“There's less competition there, but the problem is it's not clear whether the luxury department store has a really great future,” said David Schwartz, a retail analyst at financial services firm Morningstar. “A lot of luxury brands do their own direct selling.”

Bloomingdale's e-commerce sales give the company confidence that adding stores will boost digital sales in surrounding areas. About 80 percent of Bloomingdale's digital sales are in markets with physical stores, she said.

The company will open its smaller Bloomingdale's stores — known as Blooming's — and outlet stores over the next three years, Mr. Spring said on the call. In recent years, the company has opened smaller stores in malls, rather than enclosed malls, which were losing shoppers. “This is where the whole market is headed,” Mr. Swartz said.

“It makes sense for Macy's to open stores in those smaller locations, but is it too late?” He said. “There are already other companies doing the same thing.”

The decision to scale back the mid-market chain Macy's while increasing the presence of luxury chains is a sign that Mr. Spring wants to reposition the company's public image so that consumers see it as an upscale destination. But he said this does not necessarily mean that the company's stores will become a more expensive place to shop.

“I don't think taste and style should be more expensive; I don't think it should be reserved for the rich,” Mr. Spring said Tuesday in an interview. “I think we need to do a better job in our content and in our presentation and marketing, so that the customer sees What we sell and inspire.”

The company said customer research showed people want a better shopping experience at Macy's, whether through improved visual merchandising or more assistance from store workers. Selling some of its assets could help ensure such improvements, including revamping its merchandise assortment and adding more workers in areas such as its footwear and women's ready-to-wear departments.

Macy's will increase staffing in some of its stores, using data to determine appropriate staffing levels and training workers on how to recommend products to shoppers and better assist them in fitting rooms.

Mr. Spring, who spent four decades at Bloomingdale's, takes the reins of the company at a challenging time. In December, a group of investors made a bid to take Macy's private for $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, said that unless the retailer starts sharing non-public information with them, they may accept their offer to shareholders.

Activists have since nominated nine individuals to Macy's board of directors. The activists did not provide funding details and instead chose to launch a proxy contest, the company said in a statement last week. On Tuesday, Mr. Spring told analysts that Macy's board was evaluating candidates, but asked that their questions relate only to the retailer's financial results and the three-year strategy it announced.

A representative of the investor groups did not respond to a request for comment on Tuesday.

After an initial sales boost from consumer spending on all kinds of items early in the pandemic, Macy's has seen sales decline.

On Tuesday, the company also reported fourth-quarter earnings, which included the holiday shopping season. Net sales of $8.1 billion were in line with analyst estimates. Sales at both Macy's and Bloomingdale's were down from a year earlier, while sales at Bluemercury were up 2.3 percent — a sign that shoppers were continuing to gravitate toward the beauty and skin care categories.

The company said it would take a $1 billion charge related to the restructuring and store closures. Shares rose about 4 percent in midday trading on Tuesday.

Sales declined as Macy's struggled to win over the next generation of shoppers and compete in a world increasingly moving toward e-commerce.

“Macy's didn't do its best for the consumer, so consumers abandoned it and shopped elsewhere,” said Neil Saunders, managing director of research firm GlobalData. “This is a turning point for Messi.”

Mr. Saunders said the announcement was a sign that Macy's management was trying to convince investors — who had been frustrated by the company's weak profit margins — that they could meet the challenges facing the retailer.

Even before he officially took the reins, Mr. Spring had already begun to make his mark. In January, he and outgoing CEO Jeff Gennette sent a memo to employees saying the company planned to cut about 2,300 jobs, or 13% of the company's workforce, as it looked to better align its resources with customer behavior and decision-making. Faster. The company also said it would close a number of stores.

The last major restructuring at Macy's was in February 2020, when the company said it would close 125 stores and cut 2,000 jobs. Then the pandemic idled many stores for weeks, forcing the retailer to scramble to improve its website and e-commerce offerings and figure out how to get people back into stores once they reopened.

Mr. Spring said Tuesday that the company would not “bite off more than we can chew” as it operates the remaining Macy's stores. “We will be thoughtful, methodical and unemotional in our approach,” he said.

J. Edward Moreno Contributed to reports.