Macy’s CEO confirms 55 more locations are on the chopping block and blames closures on underperforming stores

MACY'S is strategically evolving to navigate the tumultuous retail landscape by revamping its product mix and operational focus — and the closure of over 50 more stores.

CEO Tony Spring outlined the company's proactive measures during the retailer's second-quarter earnings call, revealing how Macy's is responding to the changing consumer environment and its impact on business performance.

“At Macy's, which was the most impacted by the shift in consumer behavior, we aligned our assortments and shifted our marketing calendar to better balance value and fashion," Spring said during the call.

"We enhanced our promotions and delivered more targeted personalized messages across categories and brands.

"And, we invested in newness and proven areas of product strength while reducing our exposure to areas of softer demand," he added.

Despite these efforts, Macy's faced challenges as the quarter progressed, with customers becoming more discerning amid ongoing financial uncertainties.

Although second-quarter sales of $4.9 billion fell slightly short of expectations, Macy’s adjusted earnings per share (EPS) of $0.53 exceeded forecasts, according to the call.

The retailer has been grappling with the consequences of overexpansion and significant shifts in retail dynamics, which have rendered physical stores less central to its business model.

Competition from giants like Walmart, Target, and Costco, along with the rise of online retailing led by Amazon, has intensified the pressure on Macy's.

BIG CHANGES

In response to these challenges, Macy's is undertaking a significant restructuring.

The company plans to close 150 underperforming stores, categorizing them as “non-go forward” locations, while continuing to invest in its more profitable “go-forward” stores "beyond the first 50," per the call.

This strategic move aims to streamline operations and focus on profitable markets.

Chief Financial Officer and Chief Operating Officer Adrian Mitchell provided additional insights into the company's store closure strategy.

THE OUTLOOK

The key takeaway is that the company is very pleased with its progress and the positive responses from landlords and developers.

Despite the current environment, the deal pipeline remains strong.

The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores

Initially, the company expected asset sale gains between $90 million and $115 million but has now revised that estimate to approximately $115 million.

It achieved $36 million in gains for Q2 and is forecasting $30 million for Q3, leaving a balance of $67 million for Q4.

Overall, the company reports that things are trending positively with strong traction.

"The implication of that is that we're going to be closing approximately 55 stores relative to our prior outlook of 50 stores, said Mitchell.

"So this is just all further evidence of the traction that we're having. And we're also very pleased with the value we're able to unlock in those deals and those transactions,” Mitchell explained.

Macy's is among the many stores facing some closures — for good or bad.

Shoppers are dismayed after a well-known grocery chain with over 1,000 locations announced the closure of one of its stores.

Plus, customers are both devastated and enraged after discovering that one of their favorite stores is closing abruptly, weeks earlier than expected.