The magic is gone: Macy’s closing stores and cutting jobs

Macy’s said warm weather took a huge toll on holiday sales, which were much worse than expected, prompting the company to announce major cost-cutting moves.

During November and December, a period characterized by unseasonably warm weather, Macy’s said its same store sales declined 4.7%. Excluding the performance of leased departments, the comp decline was a more extreme 5.2%. Business conditions are not expected to improve with one month to go in the company’s fourth quarter period, with Macy’s forecasting comps for the full quarter will decline 4.7% compared to earlier guidance which called for a decline of 2% to 3%.

"The holiday selling season was challenging, as experienced throughout 2015 by much of the retailing industry. In the November/December period, we were particularly disadvantaged by the historically warm weather in northern climate zones where both Macy's and Bloomingdale's are especially well-represented,” said Macy’s Chairman and CEO Terry Lundgren. “About 80% of our company's year-over-year declines in comparable sales can be attributed to shortfalls in cold-weather goods such as coats, sweaters, boots, hats, gloves and scarves. We also continued to feel the impact of lower spending by international tourists as the value of the dollar remained strong.”

The weak results forced the company to reduce its full year profit forecast to a range of $3.85 to $3.90 per share compared to earlier guidance in the range $4.20 to $4.30.

In conjunction with the release of disappointing holiday results, the company said it was making some major cost cutting moves, including the 2016 closure of 40 stores and jobs cuts that will affect store level and headquarter staffing.

"In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations. Moreover, we believe we can operate more effectively with an organization that is flatter and more agile so we can pursue growth and regain market share in our core Macy's and Bloomingdale's omnichannel businesses faster and with more intensity,” Lundgren said. “We will continue to invest in strategic initiatives that anticipate emerging customer needs and create shareholder value. The cost efficiencies represent more than two-thirds of our goal of annual SG&A expense reduction of $500 million, net of growth initiatives, from previously planned levels by 2018. In some cases, there will be short-term pain as we tighten our belt and realign our resources. But our eye is on a long-term vision of Macy's, Inc. as a dynamic retailer that serves existing customers and acquires new ones through innovative approaches to the marketplace."

Those innovative approaches were on display during the holidays when one of the bright spots was growth in digital areas. Lundgren said during the November and December period the company filled nearly 17 million online orders at Macys.com and Bloomingdales.com set a new record and represented 25% growth.

“This validates the strength of our omnichannel strategy and related investments which we made over the past decade and will continue into the future," Lundgren said.

Nevertheless, Macy’s said it plans to eliminate three to four positions in each of the 770 stores that will remain after the closing for a grand total of 3,000 positions. Likewise, the company said it would implement voluntary separation agreements 165 senior executives and eliminate another 600.