Macy’s Will Close 150 Stores but Expand Bloomingdale’s and Bluemercury

Macy’s said on Tuesday that it would vastly reshape its strategy and retail footprint, closing about 150 Macy’s stores over the next three years while expanding its upscale Bloomingdale’s and Bluemercury chains.

The moves put the stamp of the company’s new chief executive, Tony Spring, on an effort to improve the profitability of the largest department store operator in the United States and stave off a potential takeover bid.

It is the second major downsizing of the Macy’s chain since 2020 and will leave the company with 350 stores, slightly more than half the number it had before the pandemic.

Macy’s called the stores it planned to close “underproductive locations” that accounted for 25 percent of the company’s overall square footage but just 10 percent of sales. The company said it expected to take in $600 million to $750 million by selling these stores and streamlining some of its warehouses.

“We have to focus on having the best stores, not the largest number of stores,” Mr. Spring said on a call with analysts on Tuesday.

The company said it would start notifying workers later that day at stores it planned to close. It plans to shutter roughly 50 stores this fiscal year and the rest by the end of 2026.

Macy’s did not identify the locations, but one is the San Francisco store in Union Square, said Mayor London Breed’s office. The store, a fixture in the shopping district for generations, will remain open for the next year as Macy’s looks for a new owner for the property, the mayor’s office said.

As Macy’s reduces its retail footprint, Bloomingdale’s is expected to open 15 locations. Bluemercury, the company’s beauty chain, will add 30 stores, and remodel others. As of November, there were 58 Bloomingdale’s and 158 Bluemercury locations.

“There’s less competition there, but the problem is that it’s not clear that the luxury department store really has a great future,” said David Swartz, a retail analyst at the financial services firm Morningstar. “A lot of luxury labels are doing their own direct selling.”

E-commerce sales at Bloomingdale’s give the company confidence that adding stores will boost digital sales in surrounding areas. It said about 80 percent of Bloomingdale’s digital sales are in markets where it has physical stores.

The company will open its smaller-format Bloomingdale’s stores — known as Bloomie’s — and outlet stores over the next three years, Mr. Spring said on the call. In recent years, the company has been opening smaller stores in strip malls, rather than enclosed malls, which have been losing shoppers. “That’s where the whole market is going,” Mr. Swartz said.

“It makes sense for Macy’s to open up stores in those smaller locations, but is it too late?” he said. “There’s already other companies doing the same thing.”

The decision to pare the midmarket Macy’s chain while increasing the luxury chains’ presence is a sign that Mr. Spring wants to reposition the company’s overall image so consumers see it as a higher-end destination. But, he said, that does not necessarily mean the company’s stores will become a more expensive place to shop.

“I don’t believe that taste and style need to cost more; I don’t think it should be reserved for the affluent,” Mr. Spring said Tuesday in an interview. “I think that we need to do a better job in our content and in our presentation and in our marketing, so that the customer sees and is inspired by what we’re selling.”

Customer research showed that people wanted a better shopping experience at Macy’s, the company said, whether with improved visual merchandising or more help from store workers. The sale of some of its assets could help underwrite such improvements, including revamping the merchandise assortment and adding more workers in areas like the shoes and women’s ready-to-wear departments.

Macy’s will increase the number of workers in some of its stores, using data to determine the appropriate staffing levels and training workers on how to recommend products to shoppers and assist them better in the fitting rooms.

Mr. Spring, who spent four decades at Bloomingdale’s, took the corporate reins at a challenging time. In December, an investor group submitted a bid that would take Macy’s private at a value of $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, said that unless the retailer began sharing nonpublic information with them, they might take their offer to shareholders.

The activists have since nominated nine individuals to Macy’s board. The company said in a statement last week that the activists had not provided financing details and had instead chosen to start the proxy contest. On Tuesday, Mr. Spring told analysts that Macy’s board was evaluating the candidates but asked that their questions pertained only to the retailer’s financial results and three-year strategy that it had announced.

A representative of the investor groups did not respond to a request for comment on Tuesday.

After an initial sales boost from consumer spending on all manner of items early in the pandemic, Macy’s has had a sales slump.

On Tuesday, the company also reported earnings for the fourth quarter, which included the holiday shopping season. Net sales of $8.1 billion were in line with analysts’ estimates. Sales at both Macy’s and Bloomingdale’s were down from a year earlier, while those at Bluemercury rose 2.3 percent — a sign that shoppers were continuing to gravitate toward the beauty and skin-care categories.

The company said it would incur a $1 billion charge related to the restructuring and closing of the stores. Shares were up nearly 4 percent in trading on Tuesday afternoon.

Sales have fallen as Macy’s has struggled to win over the next generation of shoppers and compete in a world increasingly oriented toward e-commerce.

“Macy’s just hasn’t put its best foot forward for the consumer, so consumers have abandoned it and shopped elsewhere,” said Neil Saunders, managing director of the research firm GlobalData. “This is a bit of a turning point for Macy’s.”

Mr. Saunders said the announcement was a sign Macy’s management was trying to convince investors — who had grown frustrated with the company’s weak profit margins — that it was capable of addressing the retailer’s challenges.

Even before he officially took over, Mr. Spring was already starting to make his mark. In January, he and the departing chief executive, Jeff Gennette, sent a memo to employees saying that the company planned to cut about 2,300 jobs, or 13 percent of its corporate work force, as it looked to better align its resources with customer behavior and to make decisions faster. The company also said it would close a handful of stores.

The last major restructuring at Macy’s was in February 2020, when the company said it would close 125 stores and cut 2,000 jobs. Then the pandemic turned many stores dark for weeks, forcing the retailer to scramble to improve its website and e-commerce offerings and figure out how to bring people back to stores once they reopened.

Mr. Spring said on Tuesday that the company would not “bite off more than we can chew” as it managed the remaining Macy’s stores. “We’ll be thoughtful, methodical and unemotional in our approach,” he said.

J. Edward Moreno contributed reporting.

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