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Macy's (M) Retraction Plans Expand, 125 Stores to Close, Jobs Cut and Relocated

Wednesday, February 5, 2020 | Steve Anderson
Macys (M) Retraction Plans Expand, 125 Stores to Close, Jobs Cut and Relocated

We've been chronicling the fall of retail here for some time, and in the meantime, discovering a few critical points about retail that should be getting store owners to jump on some new bandwagons. Recently, Macy's (NYSE: M) revealed some new plans that build on the previous, and that means a whole pile of stores about to close, jobs to be lost, and new plans for Macy's overall future.

28 Stores to Close? Try Quadruple That and Then Some.

It was a little under a month ago that we'd first heard Macy's plans to shutter 28 locations, and one Bloomingdale's outlet, amid some disappointing holiday sales. Things got worse over the course of the last month—much worse apparently—as new plans emerged that put fully 125 stores on the chopping block over the course of the next three years.

Macy's plans to go forward with about 400 total outlets to its name, and is pushing to expand on survival plans it already had in place. Macy's had already been on a path of abandoning stores in the weakest operating mall areas, and bolstering its spending on e-commerce operations, a path that has generally produced survival if not success for many other outlets. Amazingly, reports suggest that the stores set to be closed account for a combined total of $1.4 billion in annual sales, yet are considered to be poor performers individually.

It's Not Just the Rank-and-File Hit

Lest you think this is a blow only to the common folks running the cash registers and stocking the shelves, that's not so. Macy's is also planning to raze its own corporate infrastructure, cutting 10% of its corporate and support staff, which will send about 2,000 folks to the unemployment office.

Macy's is jettisoning one entire headquarters, planning to shut down the Cincinnati operation and transfer all remaining headquarters roles to New York City. A slate of San Francisco offices that handled technology functions are being likewise consolidated and moved to Atlanta and, once again, New York City. A data center in Lorain is also said to be on the chopping block.

The moves are expected to generate $1.5 billion in savings for Macy's by 2022, which will help not only keep the company afloat, but will also prompt new hiring in some locations to help augment the customer experience at the surviving stores.

Taking On a Plan That Seems to Work

Essentially, Macy's plans for consolidation seem to mirror plans seen successfully elsewhere, most notably, Target. Reports suggest Macy's could be planning to open new smaller-format stores, which is akin to Target's own plans that have been seen working to the point where Target was looking at a Times Square location.

In fact, another report suggests that the best 250 stores in Macy's portfolio will ultimately account for nearly 80 percent of all of Macy's sales, thanks to a series of upgrades planned for the surviving locations.

Too Little, Too Late?

The good news here is that Macy's already has a plan, and it seems to be working, at least for other retailers. The parallels drawn between Macy's and Target are compelling and hard to ignore, even if the battle plan that's working for Target—and to a different extent Walmart—may not work so well for a more upscale retailer like Macy's.

One thing that's clear, however, is that relying on mall traffic alone is a sure path to calamity. Malls just aren't the draw they once were, and that seems to be holding true even as malls start focusing less on a purely retail experience and more on an experience that offers exactly that, more experiences. We've already seen stores like Foot Locker (NYSE: FL), American Eagle (NYSE: AE) and Children's Place (NASDAQ: PLCE) lose ground dramatically, even as we've seen stand-alone stores make new headway.

The future of the mall itself isn't so important in this particular case, but what is important is how individual stores are reacting to it. We're seeing a retail landscape that's collapsing inward, going to small-format stores to address the customer demand for showrooming while also taking a lot of the delivery-cost sting out of shopping for stores by establishing drop points for online orders. Retail is changing, and those businesses that change with the market are most likely to realize gains therein.

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