What is next for America’s retailor, Macy’s?
Background:
The rise of e-commerce in conjunction with the COVID-19 pandemic has spurred closures of brick and mortar businesses and encouraged retailers to move more of their sales to online platforms. A study by McKinsey & Co which was published in 2021 demonstrates the rise of online shopping post-pandemic and also presents expected growth in the retail space based on specific industries.
Today:
We are consistently seeing the impact and influence of online retailing today. According to the New York Times on Tuesday, February 28, 2024, Macy’s announced that it would “vastly reshape its strategy and retail footprint.” New chief executive, Tony Spring, likely prompted this movement to downsize Macy’s retail presence. Furthermore, Macy’s experienced an increase in online sales during the pandemic, but is now seeing those sales figures wane which has prompted them to strategize on how to improve their sales. Reports say that over the next three years, Macy’s will close 150 stores which will ultimately mean that Macy’s will own 350 stores. This figure is approximately half of the number of stores Macy’s owned prior to the pandemic (Holman 2024). Macy’s remarks that these closures will target the “underproductive locations” which are not performing as well. The company projects a $600-$750 million sale improvement as a result of these closures of brick and mortar stores. The article cites that these 150 particular stores make up 25% of Macy’s brick and mortar square footage presence but only represent 10% of the company’s total sales. Macy’s also plans to improve the in-store customer experience in their remaining 350 brick and mortar locations, which is a growth area noted in customer surveys.
The Future:
In December, there were discussions that Arkhouse Management and Brigade Capital Management would privatize Macy’s at the price of $5.8B. These investors, however, indicated that they need Macy’s to share more nonpublic information with them or they may “take their offer to shareholders.” For now, Macy’s appears to be focused on internal improvements, not external investors. We will have to wait and see if their restructuring and closure of brick and mortar offices provides the intended growth in sales and improvement of in-person shopping at the remaining 350 Macy's stores. Or, will Macy’s ultimately have to seek outside investment for their dwindling sales?
Bibliography
Holman, J. (2024, February 27). Macy’s will close 150 stores but expand Bloomingdale’s and Bluemercury. The New York Times.
https://www.nytimes.com/2024/02/27/business/macys-earnings-strategy.html
McKinsey & Company. (May 13, 2021). Share of U.S. consumers using online shopping before and after COVID-19 as of September 2020 and February 2021, by selected categories [Graph]. In Statista. Retrieved February 28, 2024, from https://www.statista.com/statistics/1134709/consumers-us-online-purchase-before-after-covid-categories/