Macy's unveiled a new strategy to open a 'Bold New Chapter' for the struggling 166-year-old department store
Macy's unveiled a new strategy to open a 'Bold New Chapter' for the struggling 166-year-old department store AFP News

The iconic but struggling US department store Macy's announced plans on Tuesday to close almost a third of its eponymous locations by 2026 while building up its upscale Bloomingdale's and Bluemercury brands.

In a new strategy aimed at breathing life into the 166-year-old retailer, the company said it would shut 150 "underproductive" Macy's locations.

The plan, dubbed a "Bold New Chapter," said around 50 stores would be closed by the end of the current fiscal year, without mentioning how many employees would be impacted.

The plan comes a week after Arkhouse Management unveiled a proxy challenge to replace nine members of the Macy's board.

The challenge follows a rejection by Macy's in January of an unsolicited takeover proposal from Arkhouse and Brigade Capital Management.

The company, which had also announced in January it would pare its workforce by 3.5 percent, said in a statement that the new strategy would prioritize investment in the remaining 350 Macy's locations.

It also plans to open 15 Bloomingdale's stores and at least 30 Bluemercury stores in new and existing markets over the next three years, along with 30 remodeled Bluemercury sites.

Department stores have seen their results suffer for years as consumers increasingly move online, and have been forced to reduce in size -- a dynamic exacerbated by the Covid-19 pandemic.

These trends have put pressure on shopping malls throughout the United States, particularly older retail sites that have fallen out of favor.

The 150 stores targeted for closure account for 25 percent of Macy's gross square footage, but less than 10 percent of sales, Chief Executive Tony Spring said on a conference call with analysts.

Macy's has undertaken prior rounds of store closures, but Spring -- who took over as CEO this month -- said the process was more "stringent" this time, involving interviews with some 60,000 customers who described what they were looking for.

From that process, the company also determined that there was an opportunity to grow the Bloomingdale's brand, including through smaller stores and more locations away from the US coasts, Spring said.

Macy's will also expand a pilot program to try new ideas at some 50 stores.

These locales will be "emblematic of what the future of the Macy's brand will be, and that's elevated merchandise assortments, more powerful visual presentation, additional staffing in areas like women's shoes and ready to wear," said Spring, adding that the company was also looking to make its digital experience more consistent.

Along with the new strategy, the company released its year-end results for 2023, posting declining revenues and a sharp drop in profits.

Sales came in at $23.1 billion, down 5.5 percent from the previous year, the company said.

Net profits remained in the black at $105 million, but fell sharply by 91 percent.

Since 2017, Macy's sales have fallen eight percent while US consumer spending on apparel has risen by 33.5 percent, according to the calculations of analyst Neil Saunders of GlobalData, who called the drop a "massive loss of market share."

Saunders said he "broadly" welcomed CEO Spring's revamp plan, while cautioning that Macy's has struggled with previous retoolings that were unveiled with fanfare.

The reviving of the Macy's brand will be the most "challenging" component, said Saunders, adding that "it will be a long, hard slog to stop and reverse all the rot that has infected the Macy's brand over many, many years."

Macy's, the marquee sponsor of New York's massive Thanksgiving Day parade each year, said in January that it had rejected a $5.8 billion takeover bid from Arkhouse and Brigade, citing reservations about the deal's financing.

On February 20, Arkhouse nominated nine board members ahead of Macy's annual shareholder meeting, saying the shakeup was needed to replace a board with a "history of poor performance" in order "to unlock the substantial unrealized value" at the company.

Strong said on Tuesday that Macy's was evaluating the Arkhouse candidates.

Shares of Macy's jumped 4.3 percent in midday trading.