Macy’s plans to close 125 of its least productive stores over the next three years and cut 2,000 corporate jobs to reduce costs and position itself for growth as more consumers shop online.
The company said the stores slated for closure are in lower-tier malls and account for about $1.4 billion in annual sales.
The retailer is also closing offices in San Francisco, Cincinnati, and Lorain, Ohio, making its offices in New York its sole corporate headquarters.
The company said it expects annual gross cost savings of $1.5 billion, which will be fully realized by year-end 2022. It expects $600 million gross cost savings achieved in 2020.
Camilla Yanushevsky, an analyst at CFRA, said the pace of closures was “modest” across three years compared to the past.
Macy’s said its strategy is to concentrate on strengthening customer relationships, accelerate the growth of its digital business, and focus on its higher-margin private brands.
“We are taking the organization through significant structural change to lower costs, bring teams closer together, and reduce duplicative work,” Jeff Gennette said in a statement. “The changes we are making are deep and impact every area of the business, but they are necessary.”
The retailer also said it was reshaping its supply chain to support omnichannel customer behavior and upgrading 100 more stores this year.
It estimated that costs of the new strategy would be $450 million to $490 million, most of it recorded in 2019.
Macy’s reported net sales of $8.3 billion for the fourth quarter and estimated net sales of $24.5 billion for fiscal 2019. It said it expects net sales of $23.6 to $23.9 billion in 2020, below analyst averages of $24.3 billion.
The company said 2020 will be a “transition year” as it makes significant structural changes to its operations.
The company also named John Harper chief operations officer, effective January 31. Harper was previously chief stores officer.
Macy’s shares were up more than 2.7% in midday trading Wednesday.
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