Will a smaller Macy’s be a better Macy’s?
Macy’s, Inc. announced yesterday plans to cut 3,900 corporate jobs, three percent of its total workforce, in a move to reduce costs by $365 million this year and $630 million annually going forward.
“While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales,” Macy’s CEO Jeff Gennette said in a statement.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward,” he added.
On June 8, Macy’s announced that it raised roughly $4.5 billion in new financing, giving it increased financial flexibility to purchase new inventory and pay down its debt on time.
Mr. Gennette has continued to express optimism about the company’s prospects despite posting a preliminary loss of $2.10 a share in the first quarter, compared to a 44 cents gain in 2019.
“We are seeing strong sell-through of seasonal merchandise and anticipate that we will exit the second quarter in a clean inventory position,” he said earlier this month. “The holiday season will be crucial, and the team is working now to get the right merchandise and assortment in place.”
Macy’s, which furloughed 125,000 primarily store employees at the end of March, is beginning to welcome some back as it reopens locations. Others in customer support and supply chain roles are expected to rejoin the company “as sales recover.”
Wall Street did not take Macy’s job cuts as a positive sign, sending shares down nearly six percent yesterday.
Many also seem unconvinced that Macy’s three-year Polaris growth strategy, announced in February, will pay off in a big way. The plan focuses on the core strengths of its namesake business as well as its Bloomingdale’s and Blue Mercury divisions. The retailer is also planning to:
- Up its private brand-building efforts with the goal of achieving $1 billion in annual sales for four of its lines;
- Launch the 3.0 version of its Star Rewards loyalty program to engage existing customers and attract new ones;
- Add Backstage shops inside its full-line stores and expand on the launch of the standalone Market by Macy’s concept featuring a mix of local goods and other items curated for customers by location.
- Macy’s, Inc. Announces Restructuring to Address Sales Impact from the COVID-19 Pandemic – Macy’s, Inc.
- Macy’s, Inc. Statement in Response to the RWDSU – Macy’s, Inc.
- Has Macy’s secured its future success with its new financing deal? – RetailWire
- Canceled orders and furloughed employees are part of today’s retail reality – RetailWire
- Are strip centers where it’s at for Macy’s and Sephora? – RetailWire
- Will Macy’s cut its way to improved margins and future growth? – RetailWire
DISCUSSION QUESTIONS: Do you think a smaller Macy’s will be a better retailer than it was before? Which of the steps taken by Macy’s or planned as part of its longer-term Polaris strategy is likely to be most beneficial to its performance?