Macy’s announced on Tuesday, February 27th, its strategy to shut down approximately 150 of its less profitable stores by 2026, taking a step in the company’s efforts to rejuvenate its operations amidst challenges, including a recent takeover attempt by activist investors.
The store closing move is part of Macy’s broader plan to enhance its luxury divisions, Bloomingdale’s and Bluemercury, reducing its total number of stores to 350.
The store closures were announced following Macy’s rejection last month of a $5.8 billion takeover bid from investment firm Arkhouse Management and its partner Brigade Capital Management.
Macy’s has attracted interest from financial firms due in part to its multibillion-dollar real estate portfolio, which many believe is undervalued in the stock market.
Just weeks after rejecting the offer, Macy’s unveiling of this new plan aims to provide a much-needed positive narrative to reassure investors, according to Neil Saunders, an analyst at GlobalData.
Macy’s new CEO, Tony Spring, who recently transitioned from leading Bloomingdale’s, expressed confidence that closing these underperforming stores would stabilize sales through improved customer service and refreshed product offerings.
The targeted stores for closure, while constituting about a quarter of Macy’s total square footage, only contribute to 10% of its sales.
Spring remarked, “Our threshold to keep a store open has become more stringent,” underscoring the company’s new direction toward efficiency and profitability.
Among the closures is Macy’s historic flagship store in San Francisco’s Union Square, a huge loss given its size and heritage dating back to 1929.
Analysts like Saunders see potential in Macy’s focus on its more successful locations, pointing out the necessity for modernizing the shopping experience to revive the brand’s fortunes.
This strategy addresses longstanding issues of store presentation and customer service quality.
Macy’s is also navigating broader industry challenges, including a downturn in physical retail sales exacerbated by online competition.
The company reported a 1.7% decrease in net sales to $8.1 billion for the fourth quarter, with a 6% drop in same-store sales.
Despite these challenges, Macy’s is optimistic about the future, planning to expand its small-format stores to offer greater convenience to customers.
This expansion includes adding up to 30 small-format locations by Fall 2025.
Before this announcement, Macy’s had already initiated cost-cutting measures, including workforce reductions and the closure of five stores.
The company’s history of store closures reflects a strategic trimming of its retail footprint, from around 640 stores in 2018 to its future target. According to Spring, these closures are expected to generate up to $350 million in asset sale gains.
Following the news, Macy’s shares experienced an increase, rising 5.7% in morning trading to $20.40, bringing the company’s valuation to $5.6 billion.
