Macy’s has a Strategic Shift by having a Store Expansion

As Macy’s pursues sales growth, the department store operator announced on Tuesday its intention to shutter approximately 150 of its Macys-branded stores while expanding its footprint with outlets in prime locations or those catering to luxury clientele.

These adjustments underscore Macy’s strategic focus on its successful ventures such as the upscale Bloomingdale’s department stores and the Bluemercury beauty chain, while addressing challenges within its Macy ’s-branded outlets, particularly those situated in struggling shopping malls. In the latest quarterly results unveiled on Tuesday, Macy’s department stores demonstrated weaker performance compared to both Bloomingdale’s and Bluemercury.

Against the backdrop of its earnings report, Macy’s outlined its future strategy. This shift in direction comes shortly after Tony Spring, the former CEO of Bloomingdale’s, assumed the role of Macy’s CEO on February 4. Earlier in January, Macy’s had already disclosed plans to close five of its namesake stores and implement layoffs affecting over 2,300 employees.

During a CNBC interview on Tuesday, Spring explained the rationale behind the company’s reevaluation of its store network, emphasizing the need to assess the profitability and viability of each location.

“We have some stores that are just underproductive or not as profitable, and we have to address that,” Spring stated. “Conversely, we have stores that are highly productive and highly profitable. We have markets and stores and centers we’re not in today that we’d like to be in.”

Macy’s

Sales at Macy’s namesake stores have experienced the most significant decline, prompting substantial changes within that segment of the business.

The company has outlined plans to close approximately 150 stores, with 50 of them set to shutter by early 2025. While specific locations have not been disclosed, Macy’s has identified them as “unproductive.”

Macy's
Macy’s

Among the stores already slated for closure are those situated in Arlington, Virginia; San Leandro, California; Lihue, Hawaii; Simi Valley, California; and Tallahassee, Florida, scheduled to cease operations in early 2024. Conversely, Macy’s has committed to enhancing investments in the roughly 350 remaining namesake locations.

For instance, in an interview with CNBC, Spring discussed the company’s initiative to enhance customer service at 50 stores. During the recent quarter, Macy’s implemented changes such as reallocating employees to different roles, particularly providing increased support in fitting rooms and shoe departments. The company is also moving forward with its strategy to open smaller Macy’s stores in suburban strip malls.

Last year, Macy’s announced plans to launch up to 30 such shops over the next two years, each roughly one-fifth the size of its conventional mall outlets. During an earnings call with investors, Spring emphasized the distinction between the Macy’s stores slated for closure and those slated to remain open. While the 150 closing stores represent 25% of Macy’s total square footage, they contribute less than 10% of its sales.

“They’re underproductive, and we have to focus on making sure that we have the best stores, not the largest number of stores,” Spring remarked during the earnings call. In addition to economic considerations, Macy’s conducted a comprehensive evaluation over six to seven months, assessing factors such as customer demographics, digital demand, and the condition of stores or shopping centers.

As of February 4, Macy’s operated approximately 500 namesake stores, comprising predominantly mall locations, along with smaller shops and standalone locations of its off-price banner, Backstage.

Bloomingdale’s

Bloomingdale’s, which has demonstrated superior performance compared to Macy’s namesake stores, is set to expand its presence with additional outlets.

Bloomingdale's
Bloomingdale’s to open 15 new stores, targeting upscale clientele; Bluemercury expands with 30 locations.

The retailer intends to unveil approximately 15 new Bloomingdale’s stores within the next three years. While specific locations have yet to be disclosed, the company has indicated that some will venture into new markets.

Catering to affluent and trend-conscious clientele, these upscale department stores boast an array of popular luxury brands. Similar to Macy’s, Bloomingdale’s has experimented with a smaller format store known as Bloomie’s. At the close of the most recent fiscal year, Bloomingdale’s operated 33 locations, alongside three Bloomie’s shops and 21 outlet stores.

Bluemercury

Bluemercury has emerged as the standout performer within the retailer’s portfolio, boasting comparable sales growth in the fourth quarter when its counterparts faltered.

Bluemercury
Bluemercury shines with robust sales; Macy’s plans 30 new stores, and remodels 30 existing locations.

This beauty chain is poised for expansion in the coming years. Macy’s, its parent company, has announced plans to introduce at least 30 new Bluemercury stores over the next three years, with some slated for debut in untapped markets. Additionally, around 30 existing stores will undergo remodeling during this period.

Bluemercury has been experimenting with a fresh store prototype, featuring an expanded range of spa services. This innovative concept has been introduced in two locations: New Canaan, Connecticut, and Bronxville, New York. Acquired by Macy’s for $210 million in 2015, Bluemercury currently operates 159 locations as of February 4th.

Sajda Parveen
Sajda Parveen
Sajda Praveen is a market expert. She has over 6 years of experience in the field and she shares her expertise with readers. You can reach out to her at [email protected]
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