Macy’s will cut about 100 top jobs and double down on its most popular merchandise to boost profits after a disappointing holiday season.
The retailer says it will eliminate about 100 positions at the vice-president level and above to make the company more nimble as it focuses on ways to woo shoppers.
“The steps we are announcing to further streamline our management structure will allow us to move faster, reduce costs and be more responsive to changing customer expectations,” Jeff Gennette, Macy’s, Inc. chairman and CEO said in a statement.
Macy’s reported that owned stores open at least a year inched up 0.4 percent in the all-important final quarter of 2018. But Gennette said “results were lower than our expectations.”
Retail sales industry-wide were disappointing in the holiday season, and Macy’s had some additional setbacks. A fire at a West Virginia fulfillment center in November and a holiday promotional event limited to loyalty program members contributed to tepid results, Gennette said in an earnings call with investors.
The job cuts and other streamlining efforts will result in savings of $100 million a year, Macy’s says.
The company intends to increase its focus on the product categories that matter most to its customers, including shoes, beauty, fine jewelry, dresses and tailored men’s apparel.
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The chain, which for generations embodied what it meant to be an elegant department store, has also been bolstering its digital offerings at a time when traditional retailers are having to innovate to compete with online giant Amazon.
The quarter that ended Feb. 2 was the 38th in a row to experience a double digit sales increase online. And Macy’s mobile app is its fastest growing sales channel, with more than $1 billion in sales in 2018, the retailer says.
Like many of its peers, Macy’s is leveraging its network of stores to gain an edge over Amazon with online customers. Shoppers who choose to make a purchase via their computer, but then pick up the item at a store represent 7 percent of Macy’s online sales, for instance.
Its option that allows shoppers to buy online and then have an item shipped to a store has also proved popular, Gennette says, and helps lead to additional sales. “When they’re in those stores, they also buy other things,” he said.
Macy’s “Growth 50” stores, where the retailer has tried out new concepts, will expand to include another 100 locations this year.
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Those stores are promising, Neil Saunders, managing director of retail consultancy GlobalData said in a note. But “this simply isn’t enough to forcefully drive sales. Nor does it address the serious deficiencies in the shopping experience at the many other outlets.”
Macy’s says it is continuing to experiment with smaller neighborhood stores that cater to the needs of a local community.
Customers who want to shop Macy’s off-price offerings are increasingly able to do that within a conventional Macy’s store, with Backstage shops opening in 120 Macy’s locations in 2018. They will expand to 45 more Macy’s stores this year.
Where Backstage and Macy’s are offered, 15 percent of customers shop both, Gennette says.
Saunders says the retailer is making progress. But “the problem for Macy’s is that if it cannot deliver a strong set of numbers against the backdrop of a good consumer economy, its fortunes for the upcoming year, when economic growth will cool, do not look good.”
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