Macy’s, Inc. Evolves with Changing Customer Landscape, Invests for Continued Sales Growth

Merchandising and marketing to be restructured for single omnichannel view of business; Store and field organization adjustments supporting M.O.M. strategies; $140 million in savings to be reinvested primarily in technology, talent and business development CINCINNATI--(BUSINESS WIRE)--Jan. 8, 2015-- Macy’s, Inc. (NYSE:M) today announced a series of initiatives to evolve its business model and invest in continued growth opportunities as consumers change the way they shop. Actions include a restructuring of merchandising and marketing functions at Macy’s and Bloomingdale’s consistent with the company’s omnichannel approach to retailing, as well as a series of adjustments to its field and store operations to increase productivity and efficiency. (Editor’s Note: Macy’s, Inc. this afternoon also issued a separate news release announcing sales results for the November/December 2014 period and updating guidance.) “Our business is rapidly evolving in response to changes in the way customers are shopping across stores, desktops, tablets and smartphones. We must continue to invest in our business to focus on where the customer is headed – to prepare for what’s next,” said Terry J. Lundgren, Macy’s chairman and chief executive officer. “Macy’s, Inc. has benefited in recent years by having invested early and aggressively in our M.O.M. strategies (My Macy’s localization, Omnichannel integration and Magic Selling customer engagement). This has included talent, technology, omnichannel infrastructure and fulfillment capability. “We remain committed to M.O.M. as our strategic roadmap. We are continuing to learn from our experiences and to mold our business model and M.O.M. strategies around what our customers are telling us and how they are behaving so that we can continue to succeed in this environment. We are moving quickly. In many ways, this is a race to remain best-in-class – and to win with the customer. We fully expect to remain an industry leader and innovator,” Lundgren said. With changes being announced today, Macy’s, Inc. will be increasing its workforce in some functions and locations while decreasing in others so all of the company’s resources can be deployed for maximum results. In total, the Macy’s, Inc. workforce is expected to remain at a level of approximately 175,000 associates. Restructuring in Merchandising/Marketing Both Macy’s and Bloomingdale’s are restructuring their respective central merchandising and marketing functions so each brand can develop and present its assortments seamlessly across channels and provide a single omnichannel view in all product categories. Going forward, one unified merchandising and marketing organization – a hybrid of store and online buying – will support the entire Macy’s business to encourage both store and digital growth. The same is true at Bloomingdale’s. Previously, store and online assortments were bought and marketed by separate organizations at Macy’s and at Bloomingdale’s. These changes support continued growth and an enhanced shopping experience online and via mobile, as well as in stores. “Going forward, Macy’s and Bloomingdale’s will be better able to move more quickly and nimbly to select merchandise, assort inventories and serve total customer demand, no matter how, when or where the customer shops. Some redundant activity also can be avoided to accelerate speed to market, partner more effectively with vendor resources and ensure the merchandising organizations are more responsive to the marketplace in making and implementing decisions,” Lundgren said. Simultaneously, Macy’s will make selected changes to its merchandising-related functions in local districts (administrative grouping of Macy’s stores) around the country as it continues to improve its ability to localize assortments by size, color, fabric weight, style, fit, category and brand. The company will discontinue district planner positions and reinvest in new regional teams devoted to specific themes of merchandise localization. These teams will intensify Macy’s successful warm-weather strategies, as well as address topics such as meeting the needs of more traditional customers who live in northern climate zones, and better understand and support the diverse needs of multicultural customers. Macy’s field team will continue to represent a significant competitive advantage in reacting quickly to changes in customer demand and in gaining market share. These changes in merchandising and marketing are expected to affect approximately 115 associates in Macy’s and Bloomingdale’s central offices in New York City, as well as about 150 associates in local markets nationwide. The company is working to place as many affected associates as possible in other open positions. Adjustments in Stores/Field Macy’s and Bloomingdale’s are adjusting certain aspects of store and field operations and refocusing the staffing in each store location to facilitate growth, increase productivity and improve efficiency. Selling service and support is being modified to match business opportunity in each department. An average of two to three associates will be affected in each of Macy’s and Bloomingdale’s approximately 830 stores (out of an average workforce of approximately 150 associates in each store), for a total of about 2,200 affected associates nationwide. The company is working to place as many affected associates as possible in other open positions. Also, two existing Macy’s stores districts are being merged into nearby districts – thus reducing the ongoing number of stores districts to 58 from the current 60. Growth Investments Planned for 2015 The company will reinvest savings from merchandising, marketing, store and field initiatives so it can continue to invest for growth as it focuses its resources and molds its business model around emerging customer preferences. Plans for 2015 include: Creating a team within the company to explore potential opportunities for a Macy’s off-price business. While this exploration is in its early stages, the company believes that Macy’s omnichannel infrastructure and insight could lead to innovative ways to deliver value to additional segments of the customer marketplace. Continued progress in digital retailing, including further developing the technology, speed and customer experience of macys.com and bloomingdales.com as they are accessed via desktop, smartphones, tablets and apps. In 2015, Macy’s is expected to grow its San Francisco-based digital technology organization by hiring more than 150 people. Advancements in business systems and information technology, including security infrastructure, to deliver the information and functionality required to support a growing Omnichannel business. Increasing direct-to-consumer fulfillment capacity in every full-line Macy’s and Bloomingdale’s store and at the five existing dedicated fulfillment centers located in Arizona, California, Connecticut, Tennessee and West Virginia. In addition, as many as 1,500 new year-round and seasonal associates will be hired this year at a new 1.3 million-square-foot direct-to-consumer fulfillment center now being built in Tulsa County, OK. Initial operations at theTulsa facility are expected to begin in April 2015, with a total workforce of more than 2,500 associates (1,500 year-round associates and more than 1,000 holiday seasonal associates) expected in future years as the fulfillment center reaches full capacity. Opening new Macy’s, Bloomingdale’s and Bloomingdale’s Outlet stores as opportunities arise in new and existing markets. New stores to be opened in fall 2015, as previously announced, include a Macy’s in Ponce, PR, which will employ about 275 associates, as well as a new Bloomingdale’s in Honolulu, with an expected workforce of 250 associates. Store Closings/Openings Macy’s, Inc. today also detailed a series of adjustments to its portfolio of stores across the country. “Our omnichannel strategy depends on great Macy’s and Bloomingdale’s stores that not only welcome shoppers through the door and deliver an outstanding shopping experience, but that also fulfill orders that are shipped directly to customers around the country. In 2014, about $1 billion of Macy’s and Bloomingdale’s direct-to-customer shipments originated from Macy’s and Bloomingdale’s stores. Moreover, our process for Buy Online Pickup in Store has established a new dimension in customer access and convenience,” Lundgren said. “We continue to maintain a very strong nationwide network of stores through an ongoing process of selectively adding new locations while also trimming those that no longer meet our performance requirements, where the real estate can be redeployed to more productive uses, or where our leases were not renewed.” The company today is announcing two new stores: A three-story Bloomingdale’s of 150,000 square feet will be added in an expansion of Westfield Valley Fair Shopping Center in San Jose, CA. The all-new Bloomingdale’s store is expected to open in fall 2017 and employ an estimated 250 associates. Westfield Valley Fair’s current anchors include a Macy’s women’s store, a Macy’s men’s/home store and a Nordstrom. This will be Bloomingdale’s third store in northern California, joining Westfield San Francisco Centre in downtown San Francisco (opened in 2006) and Stanford Shopping Center in Palo Alto (originally opened in 1996 with a new replacement store opened in October 2014). Macy’s will build a new 155,000-square-foot store on two levels to replace its existing 136,000-square-foot Westfield Century City location in Los Angeles, CA, which was opened in 1976. The existing Macy’s will be closed inJanuary 2016 and razed to accommodate new development in the mall. The all-new Macy’s, expected to open in November 2016, will be built in a highly visible location along Santa Monica Boulevard. Westfield Century City also includes an existing Bloomingdale’s store which will be completely remodeled in 2016 and connected to new development in the mall. Seven other new Macy’s and Bloomingdale’s stores are currently planned and/or under construction, as previously announced. New Macy’s stores will be opening in: Plaza Del Caribe, Ponce, PR (150,000 square feet; to open in fall 2015; approximately 275 associates); Ka Makana Ali’i, Kapolei, HI (103,000 square feet; to open in fall 2016; approximately 180 associates). Mall at Miami Worldcenter, Miami, FL (195,000 square feet; to open in fall 2017; approximately 150 associates). New Bloomingdale’s stores will be opening in: Ala Moana, Honolulu, HI (167,000 square feet; to open in fall 2015; approximately 250 associates); Mall at Miami Worldcenter, Miami, FL (120,000 square feet; to open in fall 2017; approximately 225 associates). In addition, new Macy’s and Bloomingdale’s stores are planned to open in Al Maryah Central in Abu Dhabi, United Arab Emirates, in 2018 under license agreements with Al Tayer Group. The company also is announcing today that it will close the following 14 Macy’s stores (out of a current total of about 790 Macy’s stores) in early spring 2015. Final clearance sales will begin on Monday, Jan. 12 and run for between eight to 12 weeks. Metro Center, Phoenix, AZ (107,000 square feet; opened in 1973; 88 associates); Cupertino Square Mall, Cupertino, CA (177,000 square feet; opened in 1997; 111 associates); Promenade (main store), Woodland Hills, CA (192,000 square feet; opened in 1993; 112 associates); Promenade (furniture gallery), Woodland Hills, CA (81,000 square feet; opened in 1993; 19 associates); Gulf View Square, Port Richey, FL (84,000 square feet; opened in 1981; 78 associates); Northland Center, Southfield, MI (504,000 square feet; opened in 1954; 170 associates); Wendover, Greensboro, NC (141,000 square feet; opened in 2002; 83 associates); Ledgewood Mall, Ledgewood, NJ (73,000 square feet; opened in 1994; 79 associates); ShoppingTown Mall, DeWitt, NY (120,000 square feet; opened in 1993; 94 associates); Rotterdam Square, Schenectady, NY (120,000 square feet; opened in 1995; 98 associates); Kingsdale Shopping Center, Columbus, OH (108,000 square feet; opened in 1970; 115 associates); Richmond Town Square, Richmond Heights, OH (165,000 square feet; opened in 1998; 105 associates); Upper Valley Mall, Springfield, OH (156,000 square feet; opened in 1971; 79 associates); Southland Mall, Memphis, TN (150,000 square feet; opened in 1966; 112 associates). Together, the 14 stores being closed account for approximately $130 million in annual sales, some of which is expected to be retained in nearby stores and with online/mobile sales. The company is committed to treating associates affected by store closings with respect and openness. Associates displaced by store closings may be offered positions in nearby stores where possible. Eligible full-time and part-time associates who are laid off due to the store closing will be offered severance benefits. Once all of these changes have been implemented, Macy’s, Inc. will operate about 830 stores in 45 states, the District of Columbia, Puerto Rico and Guam. Financial Impact Changes being announced today are estimated to generate savings of approximately $140 million per year, beginning in 2015. The company expects to reinvest savings into technology and growth initiatives, including those described above, as well as to offset higher expense expected in health care and retirement plans. In conjunction with the implementation of the merchandising and marketing restructuring and store and field adjustments, as well as store closings and asset impairment charges, an estimated $100 million to $110 million of charges, of which approximately $80 million to $90 million is expected to be cash, will be booked in the fourth quarter of 2014. These charges were not previously included in earnings guidance provided by the company.