Macy’s plans to close about 150 stores in an aim to return to financial growth amid a plunge in net income last fiscal year, which an analyst attributes to the department store chain’s fading into a less significant market player.
Instead, the company intends to focus on the luxury sector with a plan to open roughly 15 Bloomingdale’s nameplate stores and at least 30 new BlueMercury stores, along with roughly 30 BlueMercury remodels, in new and existing markets over the next three years.
The company also said it plans to focus on modernizing its end-to-end operations to better serve customers.
“We are making the necessary moves to reinvigorate relationships with our customers through improved shopping experiences, relevant assortments and compelling value,” said Macy’s CEO Tony Spring.
The move comes as Macy’s booked an annual net income of $105 million, with net sales down 5.5 per cent to $23.1 billion.
“Overall, this very weak set of numbers means Macy’s is continuing to advance down a path of becoming a less relevant and a less significant player in the retail sector,” said GlobalData MD Neil Saunders.
“The gloomy results leave Macy’s in a very difficult position. It is a business with weak profit and no growth story at a time when a positive narrative is desperately needed to reassure investors who are being asked to consider board nominations in a proxy fight for the business.”
Saunders added that while Bloomingdale’s expansion might be bankable, uncertainty looms amid a weaker luxury market.
“The Bloomingdale’s expansion can work as there are several strong luxury markets where the chain is not represented. However, given the current slowdown in the luxury market and the push by high-end brands to sell more via the direct-to-consumer route, we believe this strategy comes with risks attached,” said Saunders.
For the current fiscal year, Macy’s forecasts net sales of $22.2 billion to $22.9 billion.
Macy’s seeks to pursue profitability under its current ownership, rejecting a $5.8 billion acquisition offer last month from investing firm Arkhouse Management and Brigade Capital Management.
