Macy's (NYSE: M) is restructuring how they approach business so that the department store chain can grow into the digital era.
In order to focus more on growth in the digital space, rather than emphasizing their presence in shopping malls as they've done in the past, Macy's will close 125 of its stores that are the least productive and will layoff 2,000 of its corporate employees over the next three years.
Macy's plans to close their Cincinnati headquarters and technology offices in San Francisco, consolidating those offices in New York City and Atlanta. At 2,000 layoffs, the number of cuts amount to 9% of Macy's total corporate jobs.
Currently, Macy's total stores stand at 680, and the 125 stores that Macy's will close account for $1.4 billion in annual sales for the company. However, in order for Macy's to realize its full potential when it comes to agile and online shopping trends, those least productive store locations must go.
That's according to Macy's chairman and CEO Jeff Gennette, who's led the company since 2017.
"We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams,'' said Gennette in a statement. "The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile and better fit to compete in today's retail environment."
Poonam Goyal, senior retail analyst at Bloomberg Intelligence, stated that this move has been a long time coming. According to Goyal, "We've been saying they need to close stores forever . . . [and] this is a good enough number to show that they're doing enough to solve the overstored problem in the U.S."
Expectations of Macy's restructuring plan include annual savings of $1.5 billion by 2022, with savings of $600 million in 2020 alone. Macy's current market value is $5.1 billion, down to about half of what it was five years ago.