Macy’s Inc., facing tough times, wants to pump up profits by paring down.
WWD has learned that Macy’s is offering another buyout package, this time to 700 executives across a wide spectrum of positions.
In November 2015, Macy’s offered a voluntary package to 360 executives 55 years or older and with enough years working at the company that their tenure and age would add up to at least 70. But this latest buyout tackles a much broader range of workers.
Macy’s confirmed reports of the second buyout on Saturday by releasing to WWD the following statement: “Macy’s Inc. is offering a voluntary separation opportunity to certain executives in central stores, office and support functions who meet certain age and service requirements in a move to reduce ongoing expense and streamline management.
“Approximately 700 executives across the country will be eligible for the offer. The terms of separation will vary depending on each individual’s situation. The company will not know how many executives are interested in accepting the offer until later in the year. For those who accept, exit dates are expected in spring 2017.”
Macy’s has about 20,000 executives, and between 150,000 and 160,000 total employees.
The buyouts should bolster profits, which are under pressure at the company. Store closings, charges and the generally weak retail environment were factors in the decline in third-quarter net earnings to $17 million, compared to $118 million in the year-ago quarter. Comparable sales were down 2.7 percent.
The buyouts reflect how the $27 billion Macy’s is stepping up efforts to streamline and cut costs to navigate the challenging retail climate and improve profitability.
Store closings have been dramatic, with roughly 100 stores seen closing next year, primarily in the first quarter, on top of the 41 underperforming stores shuttered at the end of fiscal 2015.
Efforts to monetize and redevelop key stores are also accelerating. Under an alliance recently disclosed, Brookfield Asset Management will have an exclusive right for up to 24 months to create a “pre-development plan” for about 50 Macy’s properties. Macy’s could add assets into the alliance. They primarily include owned and ground-leased stores and associated land, mostly in malls not owned by major mall owners. Macy’s and Brookfield will work together to redevelop the stores as well as properties on land adjacent to stores.
Separately, Macy’s is working on plans for redeveloping its giant flagships in Herald Square, N.Y.; State Street in Chicago; downtown Minneapolis, and Union Square in San Francisco. None are part of the Brookfield arrangement. In other real estate maneuvers, Macy’s is downsizing and redeveloping its flagship on Fulton Street in downtown Brooklyn and selling its men’s wear store in San Francisco.
There is some school of thought that Macy’s could sell off its Bloomingdale’s division, but Terry J. Lundgren, chairman and chief executive officer who will be succeeded by Jeff Gennette as ceo in February, has denied that the corporation is considering selling Bloomingdale’s. Lundgren shifts to executive chairman in February.
Many of these plans have been hatched in the last 18 months, ever since Macy’s felt pressure from activist shareholders to monetize its real estate assets. The activists wanted the retailer to spin those assets off into a separately listed company, but Macy’s has resisted that idea, saying it would not maximize shareholder value.
Macy’s Inc. operates Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s Outlet and Bluemercury, as well as the macys.com, bloomingdales.com and bluemercury.com.