Macy’s, Struggling to Draw Shoppers, Plans to Close 100 Stores

http://www.nytimes.com/2016/08/12/business/macys-q2-earnings-store-closings.html

Version 0 of 5.

Macy’s, the country’s largest department store chain, plans to close more than 10 percent of its locations as part of efforts to reverse years of sagging sales and increase profits.

The retailer said on Thursday as it announced its second-quarter earnings that it would shutter 100 stores, mostly at the beginning of next year. Macy’s shuttered 41 stores in its previous fiscal year.

“We believe that this reduction of 100 locations in the short term will result in a more appropriate store portfolio for Macy’s in the longer term,” Macy’s president, Jeffrey Gennette, who will succeed Terry J. Lundgren as chief executive next year, said in a statement.

Investors have been pressuring Macy’s to sell some of its real estate as the company has struggled to attract shoppers to its vast footprint of brick-and-mortar stores. Macy’s said on Thursday that the 100 stores generated about $1 billion in annual sales, but that some of the stores’ real estate was more valuable than their retail sales.

Macy’s currently operates 728 stores, including 675 full-line locations. Macy’s said that sales staff would be offered positions at nearby locations “where possible.” The company did not specify how many employees it would need to lay off, but said that it would offer severance to full-time and part-time workers.

Janna Pea, a spokeswoman for the Retail, Wholesale and Department Store Union, which represents some of Macy’s workers, said she had “no comment at this time.”

Macy’s reported that profits fell to $11 million, or 3 cents a share, last quarter, down from $217 million, or 65 cents a share, in the same period last year. Sales fell 3.9 percent to $5.8 billion.

Investors were clearly upbeat about the news. Shares of Macy’s rose more than 14 percent Thursday morning.

While shoppers have loosened their purse strings since the height of the recession, the recovery has largely bypassed the nation’s department stores. Macy’s, Kohl’s, J. C. Penney and Nordstrom have all struggled to adapt to consumers’ changing shopping patterns, which have increasingly favored discount stores and online retailers.

To compensate, these once-mighty legacy retailers have slashed prices . But some retail experts say that the ever-present discounting has ultimately hurt department stores, and, in some cases, the brands they carry.

“Closing stores is all well and good, but alone it is not sufficient to save Macy’s,” said Neil Saunders, a retail analyst with Conlumino, in an email. “As such, we are encouraged by the fact that Macy’s sees this move as part of a wider program to reinvent itself and will direct the savings from shuttered stores into its remaining locations.”

Macy’s said that it would invest in “improvements in ongoing stores and digital vehicles,” including increasing the number of vendor shops, personal styling services and licensing agreements.