Macy’s has restructurings in the works seen impacting a range of operations, from digital to private-label sourcing, buying and stores.
The $25 billion Macy’s Inc. is considering closing its San Francisco dot-com offices and relocating the operation to New York or Georgia, sources said Monday. Macy’s has a technology hub in John’s Creek, Ga., as well as tech offices in Lorain, Ohio and San Francisco. Relocations typically lead to headcount reductions and major cost savings. Macy’s was an early e-commerce adopter, launching macys.com in 1996.
In addition, “They’re stripping the field of many district merchants,” said one source familiar with the operations of Macy’s Inc. “They’re also combining some buying and planning functions at divisional and buyer levels and redoing private-label sourcing to be more by category, less by brand.” The private-label reorganization would lead to a greater emphasis on classifications and less on specific private brands.
“We do not comment on speculation,” said Cheryl Heinonen, senior vice president of corporate communications for Macy’s Inc., in response to the reports. “As we have already communicated with our colleagues, we will be sharing full details of our three-year strategic plan and growth strategies, including any impact to the organization in early February.” A Macy’s investors’ meeting is scheduled for Feb. 5 in New York.
While reports of restructurings have surfaced, Macy’s is said to be still finalizing its plans.
“There will be big savings,” said one source.
It could not be learned how much money Macy’s hopes to save through the changes, or how many employees will be affected.
Last week, Macy’s did confirm 29 store closings — 28 Macy’s and one Bloomingdale’s. The closings, happening in the near future, were a result of the company’s regular annual review of the store fleet. It is believed that many of the stores being shuttered, if not all, are cash-flow positive. However, decisions to close them would be based on mall traffic patterns, central expenses absorbed by the stores and their prospects for future growth. Macy’s, long said to be overstored, operates 645 Macy’s department stores and 35 Bloomingdale’s full-line department stores. In the 2016-17 period, Macy’s closed 100 full-line department stores. In 2015, Macy’s closed 41 stores.
Also last week, a round of layoffs at Bloomingdale’s was confirmed, though the number was not disclosed. One source said approximately 70 positions were eliminated, though another source close to the business said that number was high. Junior executives and digital merchants were among those cut.
Bloomingdale’s timed its layoffs with its move to Long Island City in Queens, N.Y. this month into The Jacx, a massive new 1.2 million-square-foot office development on Jackson Avenue, referred to as a campus. Bloomingdale’s is relocating all of its New York City-based corporate and support colleagues to Long Island City, involving about 1,000 employees. Some top executives will maintain offices at the 59th Street flagship in Manhattan as well as at The Jacx. Macy’s will move some functions as well to The Jacx.
Macy’s has approximately 130,000 employees in total. Last month, Hal Lawton, president of the Macy’s brand, abruptly left after just two years on the job to become chief executive officer of Tractor Supply Inc. Macy’s did not name a successor.
Macy’s is under pressure to show growth and greater profitability and boost its stock. Some activist shareholders have been pushing the company to monetize its real estate and close stores. The company does plan to have a tower built above its Herald Square flagship, which will have minimal impact on the store itself, and is examining other real estate opportunities across the country.
While profits have been unsatisfactory, the company maintains a healthy balance sheet and has been accelerating debt retirement. Macy’s has about $4.7 billion in long-term debt, down from about $5.5 billion a year ago. Financial sources indicate lowering debt could lead to share repurchases, potentially elevating the stock price. The stock closed at $17.88 on Monday, well below its 52-week high of $26.48, though it’s increased a couple of points over the last month.
On the brighter side, Macy’s reported Wednesday that its selling trends improved during the holiday season, though comparable sales were negative, down 0.6 percent for the November-to-December period. The minus 0.6 percent comparable sales includes owned and licensed sales. On an owned basis only, Macy’s comparable sales for the holiday period slipped 0.7 percent. The numbers beat expectations. Macy’s next earnings release will be on Feb. 25, for the fourth quarter and year. For the quarter, the company is expected to report earnings per share of $1.92, down almost 30 percent from the prior-year quarter. Net sales are seen at about $8.2 billion and down under 3 percent from the year-ago period.
In recent years, management has considered the possibility of spinning off the Bloomingdale‘s division, but that idea was nixed because a sale wouldn’t be worth it given tax implications and the lack of owned real estate, unlike Macy’s division, which has much valuable real estate including the flagship.
Read more from WWD:
WATCH: Inside Nordstrom’s NYC Flagship