Why Macy’s is shutting down dozens of stores across US

Popular US departmental store chain Macy’s has announced that it is planning to shut down as many as 65 stores by the end of January 2025, which is 15 more than previously planned, according to reports.

CEO Tony Spring made this announcement during the company’s Q3 earnings call, saying that the move is part of the retailer’s ongoing “Bold New Chapter” strategy. Overall, the department store chain is planning to shut down as many as 150 stores by 2026.

Macy’s CFO Adrian Mitchell said that the closure of stores will be done in a strategic manner, with greater focus on locations that are not performing well.

The decision to accelerate store closures comes as Macy’s faces growing challenges from the changing consumer behavior trends in US, including a stark shift towards online shopping.

Spring said that the decision is aimed at creating a more sustainable and profitable business model. “This initiative gets us even closer to becoming a more profitable Macy’s, Inc.,” he said.

Meanwhile, Macy’s also reported a 2.4% decline in total net sales for the quarter, amounting to $4.7 billion, though its same-store sales rose 3.2%. This was largely driven by women’s advanced contemporary apparel. Other growing categories included beauty and digital, along with new brands like Jenni Kayne and Kim Kardashian’s Skims.

Meanwhile, the retailer’s luxury segments, such as Bloomingdale’s and Bluemercury, showed positive growth in the third quarter.

Despite the store closures, Macy’s is committed to enhancing its luxury offerings and digital presence. Mitchell reiterated that the closures are limited to locations where the economics are unfavorable, noting that Macy’s performs best when it has both a physical and digital presence in a market.

“We continue to see that when we have a physical presence and a digital presence, by far, we have the best economics,” said Mitchell.

Macy’s strategy also includes opening and revamping stores, with plans to remodel 50 key stores, known as the “First 50,” which are seen as models for future locations. Sales at these stores rose 1.9% in Q3. Additionally, Macy’s plans to open nine new stores and remodel two more in the fourth quarter of 2024.

The closures are part of a broader trend affecting the retail industry, as many brick-and-mortar stores struggle to compete with e-commerce. Activist investor Barington Capital Group expressed support for Macy’s plan, saying that closing low-productivity locations could lead to healthier stores and improve revenue and profits in the long run.

Macy’s has faced additional challenges, including a recent internal investigation into an employee who allegedly hid $150 million in expenses. The investigation, however, concluded that these errors did not impact the company’s financial results.

The move to close stores is part of Macy’s efforts to adapt to changing retail trends and focus on profitable growth in an increasingly digital shopping environment.

Macy’s plans to enhance digital presence while closing physical stores.