Macy’s, Inc. New Restructuring Plans Hit Share Price

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Cincinnati-based Macy’s announced late Thursday afternoon that it was planning to close 14 stores this spring and refocus its efforts on its ecommerce business. The iconic retailer also noted it planned to restructure the merchandising and marketing operations at both Macy’s and its upscale sister brand Bloomingdale’s. The restructuring will impact around 115 associates, but the Macy’s workforce is anticipated to remain close to 175,000.

Of note, shares of Macy’s were down by around 2.6% at $66.05 at 1:32 ET in Friday trading, but the retailer’s shares are up a solid 18% over the last 12 months.

Details on Macy’s restructuring plan

The company noted that in addition to the closure of 14 stores, it was planning to open two new stores in California. The CEO further noted the BoD had put together a team to explore budget (or off-price) stores. “In many ways, this is a race to remain best-in-class — and to win with the customer,” Terry Lundgren, the CEO of Macy’s, commented in a press release.

Furthermore, Macy’s noted that its digital strategies had become increasingly important to business operations, and that both Macy’s and Bloomingdale’s websites and smartphone apps “performed exceptionally well in the holiday season”.

The historic retail chain chalked up a better than expected 2.7% increase in same-store sales for the key November through December holiday sales period. Moreover, the retailer revised its fourth-quarter same store sales to up by around 2.5% to 3%. Consensus analyst expectations were for an increase of only around 2.4%.

Statement from analyst

David Glick, a retail industry analyst with the Buckingham Research Group, noted: “While Macy’s continues to invest in ecommerce and evolve with the consumer, we remain concerned about its ability to accelerate comparable store sales beyond low single-digits and earnings per share growth back to low double digits to mid-teens; this concern was validated by the lack of upside to fourth quarter and likely no net cost savings in FY15.”

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