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Macy’s Shifts to ‘A Bold New Chapter’
On Tuesday, Macy’s announced a new turnaround plan, “A Bold New Chapter,” that calls for the closing of about 30% of its traditional department stores, the opening of smaller versions of its namesake chain, and adding more Bloomingdale’s and Bluemercury locations.
“This isn’t just about shrinking,” Macy’s new CEO Tony Spring told The Wall Street Journal. “This is about resizing the portfolio to make sure we are giving people an opportunity to shop the way they want.”
A total of 150 full-line Macy’s locations will close over the next three years. The stores set to close represent about a quarter of gross square footage in 2023 but less than 10% of sales. The remaining 350 Macy’s locations outperformed non-go-forward locations by 500 basis points in comparable-store sales and by 950 basis points in four-wall adjusted EBITDA rate, Spring noted in the company’s Q4 2023 earnings call.
Macy’s has already closed about 350 department stores over the last decade amid struggles against big-box discounters, fast-fashion chains, and online competitors. Niche specialty chains inside the mall have also done a better job over the years, reaching younger consumers.
Macy’s continuing department stores will undergo upgrades, including elevated yet streamlined merchandising offerings, enhanced visuals, and additional staffing in areas like women’s shoes and ready-to-wear. Macy’s hopes to save $600 million to $750 million from the sales of assets through 2026, mostly by selling off stores, outparcels such as parking lots, as well as some logistic centers, according to Women’s Wear Daily.
As previously reported, 30 small-format, off-mall Macy’s locations are still set to open over the next two years that enable the retailer to target high-traffic shopping centers. Currently, Macy’s has 12 smaller-format stores.
Other plans for the Macy’s banner include an ongoing overhauling of its private label assortments, rationalizing and monetizing the supply chain, and better positioning the digital experience around “inspiration,” according to Spring.
Macy’s also plans to open as many as 15 new Bloomingdale’s locations and at least 30 Bluemercury stores over the next three years to increase its luxury presence. It will also remodel around 30 existing Bluemercury locations. As of October, there were 58 Bloomingdale’s stores and 158 Bluemercury locations. Both banners have been outperforming the core department store business.
Meanwhile, Macy’s is under attack from activist investors who have offered to buy the company for $5.8 billion. In January, it eliminated 13% of its corporate staff and said it would close five stores.
The new plan by Spring, who formerly led Bloomingdale’s, accelerates many efforts by former CEO Jeff Gennette, including department store closings and increased emphasis on small-format locations and luxury. Spring told analysts, “We will test and learn and not bite off more than we can chew.”
Discussion Questions
What do you think of Macy’s plan to accelerate department store closures while ramping up the expansion of smaller-format stores and luxury concepts?
What other steps should they be exploring to reimagine the department store business?
Poll
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Georganne Bender
Principal, KIZER & BENDER Speaking
Dick Seesel
Principal, Retailing In Focus LLC
That Macy’s has to close so many stores is because the business has been neglected for so long. Over years it failed to invest in shops, failed to evolve the proposition, failed to respond to competition, and failed to prune its real estate. Amputation is now a necessary evil to cut out the rot. This is unfortunate, but we are where we are. What’s now critical is that Macy’s learns these lessons and reinvigorates its remaining stores and starts making them, and its brand, more relevant through better assortments, better selling environments, and better service levels. Improving what is sold and how it is sold goes to the heart of Macy’s longstanding issues. Achieving this will be far from easy. However, the initial plans are sensible even if they are thin on detail. But these things need to be more than words on a page, or phrases uttered to investors. They need to be delivered – and, historically, execution has been Macy’s weak spot. Let’s hope the bold new chapter doesn’t become the same old story!
As for the expansion of luxury, that makes some sense as there are several strong luxury markets where Bloomingdale’s is not represented. However, given the current slowdown in the luxury market and the push by high-end brands to sell more via the direct-to-consumer route, this strategy comes with many risks.
We talked about Bloomies on LinkedIn. I don’t believe the stores that are not the one on Lexington in NY will have the same panache.
imagine if Harrods opened auxiliary stores!
Well the Bloomingdale’s in Ala Moana – which is a very successful mall – is always extremely quiet. Harrods has expanded outside of London but, to your point Paula, it developed an entirely new concept “H Beauty” which is only focused on beauty. It did not try to replicate the Knightsbridge flagship.
That is my point. TBH, I’m not even really sure the original Bloomie’s is what it was. The last time I was there (pre-pandemic) it was having a 2 for 1 sale on winter coats…in January. And they were loaded with product. The only thing unusual I saw was a sign warning you that you were being tracked.
Big brother is watching!
Déjà vu: no it’s not one of macy*s house brands, it recalling a comment offered 09/09/16
or how about this one on 02/05/20
I still stand by these statements – how could I not? – but it’s become even harder to have any faith where this is headed, since one of those “top doors”, Water Tower Place, has been closed, and another Union Square, is on the latest cut list. (And these weren’t just on the Top 150, they were Platinum Doors..Top 30). Indeed the SF plans – 30 years ago this was a $200M+/yr behemoth, and even today it’s listed on macy*s web site as a main attraction – are hard to comprehend. Retail is of course ever- and fast changing, but at macy*s the only change seems to be an acceleration toward collapse.
Macy’s is smart to rightsize by deciding to close underperforming stores, upgrade remaining stores and invest in small, off-mall locations. Times have changed and its resource allocation needs to change, too.
To revitalize its business, Macy’s can adopt technologies that modernize its processes for efficiency and agility, and improve the in-store customer experience.
It’s hard for me to have any level of confidence that Macy’s will turn around, even with a renewed focus and new leader. Particularly given that the new CEO is a life-long Macy’s career man, who has been in place during the previous initiatives, and, again of Macy’s own making, is that they have un/under invested in stores for so long that it will be super difficult to get them up to a standard that today’s shoppers demand.
It’s an extremely unfortunate situations for Macy’s associates and customers as well as the communities they serve.
The last thing the world needs is another luxury retailer. That’s borderline crazy.
Expanding just at the time the luxury market is starting to slow…
It may be a little overdue, but this bold new chapter is exactly what is called for. The magnitude of the store closure suggests that they have not only seen the future, but the math of present day store counts and square footage just doesn’t work any more. I feel bad for the 150 stores and the 150 malls involved, but there aren’t really any surprises here. The math of the unproductive space and inventory has been staring everybody in the face for some time. And now we have a decision.
Now the good news. The stores that will remain open are productive and profitable. And it sounds like Macy’s will net some cash out of the closures and liquidations. So…investment in the forward stores is possible. And needed! This was the confluence of painful events that had to unfold for a true forward strategy to take place. I am hopeful, and even slightly optimistic, that retail has a shot at reinvigorating the middle of the market that became so commoditized.
I agree, Jeff. Overdue, but better late than never. Let’s hope this is the start of a real turnaround.
Mr. Spring is saying some of the right things, but we’ve heard similar things from Macy’s before. Strategy is strategy, but ultimately you need to execute and deliver different outcomes. This is hard to do when you’re under the gun financially – they don’t have the luxury of time. Meanwhile, Mr. Spring has an activist investor breathing down his neck. The additional pressure won’t be helpful. Quickly closing the under-performing stores is a first good step, but it will also leave a revenue hole that will need to be made up. Increasing luxury and opening a small number of small format stores isn’t going to do it.
Mark, a “revenue hole”? Wouldn’t less revenue and more profit be preferable to where they are today?
As a reflection of the department store’s trajectory, Macy’s story symbolizes an even bigger one: the shrinking of the American middle class. According to Pew Research, the share of aggregate income by the U.S. middle class in 1970 stood at 62%. By 2020, that percentage had plunged to 42%. Over that same period, the share of aggregate income attributed to upper-income households rocketed from 29% to 50%. Social and technological trends accelerated that downward trajectory with the rise of competing retail formats and the availability of broadband internet, enabling e-commerce with changing shopping trends and customer buying patterns.
How Macy’s got to this point is water under the bridge. After decades of aggressive acquisitions, nameplate conversions, and centralization of operations across nearly a thousand stores, in 2008, the company shifted to localization and “My Macy’s.” By 2015, a store closure strategy began to take shape. With this week’s announcement, a go-forward fleet of 350 stores will fly Macy’s colors.
Regrettably, we have heard this tune before. Macy’s Polaris strategy of February 2020 was supposed to achieve turnaround through five levers: to strengthen customer relationships (Loyalty 3.0), curate quality fashion (higher margin private brands), accelerate digital growth (e-commerce), optimize store portfolio (store closure), and reset cost base (headcount reduction). This time, the “Bold New Chapter” deviates from its predecessor in its focus on growing the luxury segment of the portfolio via the Bloomingdale’s and Bluemercury nameplates. Regardless of strategy, it’s good to recall that retailers increasingly rely on noncore retail line items to boost the bottom line; Macy’s credit card business represented nearly 50% of its operating profits in 2022.
It is hard to suppress the cynicism with this latest grand plan among a long string of similar announcements over the years. However, with a new CEO and a board mandate to change Macy’s trajectory, Tony Spring must move urgently to ensure the organization is set up to effect the new Macy’s. The complex phase is not developing the latest multi-year strategy; it is leading the transition period with sufficient energy and momentum to truly upend the status quo. Ignoring the people and organizational constructs will surely snuff out this latest of lifelines. Borrowing from the English poet Alexander Pope, “hope springs eternal in the human breast,” today, it does for Macy’s and Tony Spring.
Dr. Amer, I would give you an “A” for analysis in my class. The only thing you are missing relative to the destruction of the Middle Class is taxes and trickle-down economics. For Macy’s itself, the destruction started when they changed Marshell Field’s (et al.) to Macy’s, and they haven’t made a good decision since.
Professor Detroyer, I’ll take your “A” with a hat-tip to fiscal policies. I couldn’t agree more on Macy’s value destruction through the acquisition frenzy followed by their nameplate conversion to Macy’s. The centralization vs. decentralization debate played out in the 2000s, when applied to a shrinking format (full-line department stores), becomes an exercise in pruning branches and cutting trees while wholly disconnected from the changing contours of the forest.
The nameplate conversion was a really dumb move. Beloved regional department stores became….Macy’s”. I remember saying at the time…so Macy’s is going to anchor both ends of some malls? Mr. Lundgren held it together for a decade – I’m not sure how he did it, but he did – and for the past few years the time has come to pay the piper. Department stores are a sea of sameness – well of course they are – most of them even have the same name now. More proof that expense management is not good for business long term. Sure it’s cheaper to have all the same signage and buyers. But it becomes simply boring.
Kohl’s had a window to take the lead. Failed. Now we talk about the death of department stores.
Yes, agree on Kohl’s. Over the past few years its value slide has ben worse than Macy’s. There’s a lot of work to do there to revive things.
Much of this sounds like the right way to go, but, of course, the proof will be in the execution. Unfortunate that so many stores need to go in the process, but that clearly indicates the severity of the challenge.
Macy’s isn’t going out of business! They are just changing to keep up with consumer demand, trends, expectations, and habits. And good for them! That’s what they have to do to stay relevant. With the rapidly changing ways consumers shop, you can’t do what you’ve always done. If you don’t believe that, remember the story of Blockbuster Video. Enough said!
What Macy’s is describing as a “bold new chapter” feels like a strategic retreat. While any store with hundreds of locations needs to weed out its weakest sites, this is a sign of Macy’s benign neglect for many years. Who among us has not walked into a Macy’s store badly in need of fresh paint, new carpet, and adequate staffing?
Even in the face of improved brick-and-mortar sales across the retail industry, Macy’s has overseen the physical decline of its stores for far too long and is now paying the price. The number of store closings may help Macy’s bottom line in the short run but will do nothing for the chain’s relevance. Does the fate of JCPenney or Sears ring a bell?
“Does the fate of JCPenney or Sears ring a bell?” Absolutely!!!!!
It is delightful to shop Macy’s online, but always a mess in the store. I’m not sure that having fewer stores will fix this.
I don’t want to imagine a retail world that doesn’t include Macy’s. But the stores are tired, and some are a neglected mess. We have been commenting on promised change for years that never seems to happen.
The same retailer that gives us the magnificent Herald Square store, and brings us the Thanksgiving Day Parade each year, should be able to maintain its branches better than it does. I want Macy’s to succeed and I am counting on Tony Spring to get the job done.
“This isn’t just about shrinking” is a loaded thou-dost-protest start to Macy’s rationale. It’s difficult for a stack-it-high-and-let-it-fly retailer to downshift to a small format strategy. Although that’s a term usually reserved for mass retailers, Macy’s merchandising usually fits the bill. How will its small format assortments compete when national brands are ubiquitous and private brands largely undifferentiated?
Retailing 101: you open many stores, and you close the underperforming stores. If too many stores underperform you change leadership. Leadership rebrands what’s going to save them.
I get it. And I want to believe it. After all, it’s retailing 101.
How many times have we discussed Macy’s new plan for resurgence.? Would I be exaggerating if I said ten? My question at this point is, what are we trying to save? I believe saving Marchal Field’s, Bullock’s, and Burdine’s might be easier than saving Macy’s. If you can identify those names, you see the problem right away.
What does Macy’s mean outside of July 4 Fireworks and a Thanksgiving Parade, neither of which causes a shopper to say, “Let’s go to Macy’s”? What does the b4rankd stand for in the shoppers’ minds? Very little, I contend. And today’s plan will make it stand for less. To give this brand meaning to today’s shoppers is nearly impossible.
If our objective is to optimize shareholder value, sell the real estate, spin-off Blue Mercury and Bloomies, and say “goodbye” to a meaningless brand.
Gene, to follow your train of thought, localization has been a lifeline for Barnes & Noble and could be for Macy’s too — maybe by restoring some of those nameplates that resonated with regional customers. Or maybe (to your point) the horse left that barn as soon as the Rich’s, Dayton’s and other signs came down years ago.
I want my Dayton’s back. It might just be easier to start a new fashion retailer from whole cloth, as it were. Localized design, sourcing, and even production where possible – Minnesota producers like Fairbault Mill and Bemidji Woolen Mills are figuring out short-run high-quality textile manufacturing. Let’s see local retailers and true variety come back to markets like Atlanta, Chicago, Detroit, and Dallas!
The closure of 150 Macy’s stores sounds drastic and is a media attention grabber, however, it is an essential shift in strategy away from under-performing unprofitable stores to invest in top performing stores and segments. This move may be long overdue and it is probably a reaction to fend of active investors threating to buy the company.
Well, from the article…
“A total of 150 full-line Macy’s locations will close over the next three years. The stores set to close represent about a quarter of gross square footage in 2023 but less than 10% of sales. “
Enough said!
Execution will be the factor here. Macy’s needs to do everything the article said, especially with respect to loacation revamp. We all know that.
From the May consolidation in 2006 I ALWAYS believed that a single nameplate was ludicrous. What you save in bags and advertising you give up in reach. Macy’s is middle market and that was OK. It could have, and seemingly has, stayed there. They have Bloomies which is their Federated legacy High End, Great. Expansion at this point may perhaps bring benefits.
They themselves jettisoned so much that may have regionally helped them — Burdines, Rich’s, Bullocks, I Magnin, and Do NOT even get me started on the debacle of Marshall Field’s!!! These regional stores may have brought them local loyalty, as well as difference, IF that would have been carried out correctly? They could have even only had ONE location of each, to drive singular specialness.That would have required separate small teams for those locations, and I do not believe Macy’s wanted anything to do with that. They thought all the nameplates were a very bad thing, as they and Mr. Lundgren so strongly stated. Macy’s seemed to only want homogenization.
They also could ahve saved a seemingly down market store, or created a downmarket store from the dozens and dozens of nameplates, a countrywide bargain shop–Perhaps “Stern’s”. Again, if done the right way, this could also be paying off now, as it has for TJX, or Ross. Yes they Do have backstage, so perhaps again, it is simply a matter of execution.
The small format stores may yet prove to be a positive. They must learn how to properly merchandise a small store. I feel badly for all the associates that will be out of a job. That has to be a lot of people. Thank You all, as always, for the opportunity to voice my opinion.
The true “Bold New Chapter” will be when they finally shut the entire business down. Sadly, the department store format has been on life support for too long. Maybe Harrod’s can stay open due to the tourist trade. But everyone else? This game is over and they probably know it.
The focus on the luxury niche makes sense. However, unless Macy can really transform & invigorate its current flagship stores, the Macy brand may follow in the footsteps of Sears. Recall, “Sears is where America used to shop.”
This is a thinly veiled attempt by Macy’s to close poor performing stores, as they slim down their portfolio. Macy’s efforts to eliminate their losing properties is just the tip of the iceberg, when we examine the Macy’s retail template. Department stores are dead. Literally and figuratively. This is an age-old dinosaur that is beyond its’ life expectancy and our only question is how long will Macy’s continue to struggle before giving up??
Closing the regional franchises was a big mistake -allowing all the national brands to be featured in tjmax -Ross-Marshall’s-Burlington -was a big mistake -being late with the internet – was a big mistake-the new strategy will be a problem- they could succeed by discounting the merchandise they currently carry -customers will respond rather than the odds and ends at the above mentioned discount stores customers in the US have voted for value for the last 30 years – think Costco etc what makes you think they will change ?
I’m not seeing one plan. There’s a little bit of this and a little bit of that. It worked for my mother’s cookies. They were delicious. She could look into the mixing bowl and see what was missing. She grabbed a handful of flour and tossed it in the bowl. I don’t see Macy’s plan as holistic. What does the location map look like? The rationale seems to be “this location worked”, “this one didn’t” so shut it down. Blue Mercury is doing well. Let’s throw a few more into the bowl. And we’ll try not to upset the mixture, but we want to have more Bloomingdale successes because we want to be known for luxury destinations too. I agree with those who say the department store is no longer the draw and shopping experience people are looking for or for that matter enjoying when they’re in the store. Macy’s, in particular, has so few staff and messy displays, it’s a reason to walk out.
Macy’s is restructuring (again) to allocate more resources to its busier and more upscale stores, including Bloomingdale’s, where CEO Tony Spring previously worked as CEO. Unlike his predecessors, Spring appears to be aware of some of Macy’s shortcomings.
It is expected that Macy’s will do better in keeping up with change than it did before. There are a number of factors to consider, including ages, generations, trends, styles, store designs, layouts, etc. Macy’s also needs to adjust to the growing death of regional malls.
Takeovers by activist investors who want to take Macy’s private are another challenge Macy’s faces. However, that might not be a bad thing. The mindset of private companies can be longer term than just three months at a time.
Customers used to visit Macy’s and most other department stores because of what they carried and the promotions they offered. In addition, department store shopping in itself was an “experience,” as were the enclosed regional malls.
Today, however, Macy’s is bland, and stuck in many indoor malls that barely remain open, without other anchors like Sears, who left empty four-story ghost palaces.
As far as Macy’s is concerned, it is getting its butt handed to them by mass merchandisers, especially Target, and also category killers such as Ulta and other strip mall retailers.
Macy’s has also lost sizable market share to online shopping, but unfortunately for Macy’s, not much their own. Macy’s needs to get better at e-commerce too, and make it more shopper-friendly with the stores.
In focusing on upscale and premium, the new CEO has the right idea; those are the consumers they can still “own.” Target does a phenomenal job with trends and styles, and mid-level brands, but department stores like Macy’s can win on the higher level.
Additionally, Macy’s needs to be more aggressive with promotions, advertising, marketing, and communication. By bringing all those assets together, they might save not only themselves, but also a few malls.
We don’t know yet how Macy’s management team will perform, nor the effects and results of other variants, so I shall not make predictions, but I think we all hope Macy’s will succeed – – you know, for old times sake! – Db