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Macy’s To Close 100 Full-Line Stores

Outlines Other Moves To Drive Profitable Growth
August 11, 2016
Seeing second quarter sales decrease nearly 4%, Macy's Inc. this morning announced plans to close 100 of its 675 full-line stores - about 15% of its fleet.

The locations of the 100 stores to be closed will be announced at a later date, once the company makes final determinations.

While still maintaining a significant bricks-and-mortar presence in 49 of the top 50 U.S. markets, Macy's said it plans to operate fewer stores and concentrate its financial resources and talent on its better-performing locations to elevate their status as preferred shopping destinations.

Most of the stores slated for closure will close early in 2017, with the balance closing as leases and certain operating covenants expire or are amended or waived.

"The announcements we are making today represent an advancement in our thinking on the role of stores, the quality of the shopping experience we will deliver, and how and where we reinvest in our business for growth,” said Jeff Gennette, Macy's current president and CEO designate starting in the first quarter of next year.

In the short term, the company expects its topline sales to be somewhat smaller, but said the closings will help the retailer to grow comparable sales more quickly.

The outlined initiatives also include re-creating Macy's physical store presence as customer shopping preferences and patterns evolve, reallocating investments to highest-growth-potential store and digital businesses, and capitalizing on opportunities within the company's real estate assets.

"We operate in a fast-changing world, and our company is moving forward decisively to build further on Macy's heritage as a preferred shopping destination for fashion, quality, value and convenience,” said Terry J. Lundgren, Macy's chairman and current CEO. “This involves doing things differently and making tough decisions as we position ourselves to serve customers who have high expectations of their favorite stores, online sites and apps."

In a number of cases, stores will be closed as the value of the real estate exceeds their value to Macy's as a retail store.

"Nearly all of the stores to be closed are cash flow positive today, but their volume and profitability in most cases have been declining steadily in recent years,” Gennette said. “”We recognize that these locations do not yield an adequate return on investment and often do not represent a customer shopping experience that reflects our aspirations for the Macy's brand.”

“We decided to close a larger number of stores proactively so we can invest in a winning customer experience in our most productive and highest-potential locations, as well as invest in growth sooner and more aggressively in digital and mobile,” he added.

Moving Forward on Real Estate

The department store chain also continues to pursue opportunities to generate value from its real estate portfolio in other ways.

The company has been examining opportunities for four of Macy's large downtown flagship stores in various cities. It is in negotiations to sell the Macy's Men's Store on Union Square in San Francisco for redevelopment.

In addition to the flagship stores, the company also is looking at opportunities to develop or redevelop all or a portion of a real estate holding exceeds the value of its existing use. This will occur through sales of assets or portions thereof (some of which are included in the 100 stores to be closed) and exploration of possible joint ventures or strategic alliances with development partners.

Including its full-line stores, Macy’s operates 728 stores overall.

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