Big moves at Macy’s
Macy’s announced a series of major operational and merchandising moves to accelerate its omnichannel approach while also releasing solid holiday sales.
Actions announced by the company include a restructuring of merchandising and marketing functions at Macy’s and Bloomingdale’s consistent with the company’s omnichannel approach as well as series of adjustments to its field and store operations to increase productivity and efficiency that include closing 14 of its 790 stores and some related layoffs.
“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 CEO. “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.”
News of the extensive changes comes as Macy’s revealed same store sales for November and December increased 2.7%, toward the high end of the company’s forecast of 2% to 3%. Excluding sales of licensed departments, same store sales increased 2.1%.
That level of top line growth was sufficient for the company to maintain its full year profit forecast which calls for earnings in the range of $4.25 to $4.35 per share. The guidance excludes a charge of $100 to $110 million the company plans to take in the fourth quarter related to the closure of 14 unproductive stores and other restructuring moves.
"We feel very good about our performance in the November/December period as we reversed trend from a soft third quarter and set the stage for continued progress going forward,” Lundgren said.
Going forward is what the merchandising and operational changes are all about. Lundgren explained the company is in a race to remain best-in-class and win with customers in a future where retail winners must provide a seamless brand experience across physical and digital platforms.
Accordingly, 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. A unified merchandising and marketing organization – a hybrid of store and online buying – will support the entire Macy’s and Bloomingdale’s businesses to encourage both store and digital growth. Previously, store and online assortments were bought and marketed by separate organizations at Macy’s and at Bloomingdale’s.
“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,” Lundgren said. “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.”
In addition, the company is tweaking its merchandising-related functions in local districts to improve the ability to localize assortments by size, color, fabric weight, style, fit, category and brand. Among the changes, the company is eliminating positions known as “district planners” and reinvesting in new regional teams devoted to specific themes of merchandise localization. Plans call for these teams to intensify Macy’s 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 contends its field team will continue to represent a significant competitive advantage in reacting quickly to changes in customer demand.
At store level, the company has big plans to increase direct-to-consumer fulfillment capacity in every full-line Macy’s and Bloomingdale’s location and expand its existing fulfillment center network in Arizona, California, Connecticut, Tennessee and West Virginia with a new 1.3 million square foot fulfillment center opening this year in Tulsa.
“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,” Lundgren said, noting about $1 billion worth of merchandise was shipped from stores last year.
Macy’s physical footprint will change slightly in the coming year with the planned closure of 14 stores that collectively generated only $130 million in sales last year. Offsetting those closures, Macy’s announced two new locations and reconfirmed plans for seven others.