Macy's will close 150 stores over the next three years and 50 by the end of 2024, the department store said Tuesday after posting a fourth quarter loss and declining sales.
At the same time the company signaled a pivot to luxury. It said it would open 15 of its higher end Bloomingdale’s stores and 30 of its luxury Blue Mercury cosmetics locations.
While adjusted net income and revenue topped Wall Street expectations, Macy's offered a muted outlook for the year. Shares were essentially flat before the opening bell.
The department store chain faces a proxy fight from Arkhouse Management which nominated a slate of nine director for election to Macy's board last week. Last month, Macy's rejected a $5.8 billion takeover offer from the hedge fund and Brigade Capital Management, an investment manager.
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Activist investors and pressure to increase sales are just two critical issues facing new CEO Tony Spring, who succeeded Jeff Gennette earlier this month.
"We are making the necessary moves to reinvigorate relationships with our customers through improved shopping experiences, relevant assortments and compelling value,” said Spring in a statement.
Even before the pandemic, department stores were facing intense competition from online rivals. Neiman Marcus and JCPenney both filed for Chapter 11 bankruptcy protection.
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Consumers have proven resilient and willing to shop even after a bout of inflation, though behaviors have shifted, with some Americans trading down to lower priced goods.
Macy’s is maneuvering to shore up sales by accelerating the expansion of small-format stores that can provide more convenience to its customers. It announced plans in October to add up to 30 small-format locations through the fall of 2025, bringing the total number to roughly 42. The next round of expansion starts in the fall.
Yet Macy's is still cutting jobs to bring down its costs. In January, Macy's said it would trim about 3.5% of its total workforce, roughly 2,350 employees, and the iconic department store is closing five locations.
Arkhouse and Brigade offered $21 for each of the remaining shares in Macy’s they don’t already own. Macy’s said it had had concerns about the financing plan and the value of the offer.
Last week, Macy said that it was seeking additional financing information from Arkhouse and Brigade to potentially advance talks with its board. Rather than providing that additional information, Macy’s said Arkhouse sought to extend its director nomination window by 10 days.
Macy's had a quarterly loss of $71 million, or 26 cents per share. Adjusted for one-time charges, Macy's made $2.45 per share, topping Wall Street projections for $1.98, according to FactSet.
That compares with a profit of $508 million last year in the same period.
Sales fell to $8.12 billion, down nearly 2% from a year ago, but still better than the $8.09 billion that industry analysts had expected.
Online sales decreased 4% compared with the year-ago period, while sales at stores were roughly flat.
Comparable sales, which included sales at stores and its digital channels opened at least a year slipped 5.4%.
The company expects profit for the current fiscal year to be in the range of $2.45 to $2.85 per share, while sales should range from $22.2 billion to $22.9 billion.
Analysts were expecting a annual profit of $2.77 per share on sales of $22.81.
