Even before new CEO Jeff Gennette replaces Terry Lundgren as Macy’s CEO in 2017, the company is already making major chances, most recently with the announcement that they will be closing 100 retail locations next year. This announcement same soon after Macy’s suffered their sixth consecutive quarterly decline in sales.
These locations make up about 15% of all of Macy’s full service stores, but only 4% of their annual sales. The announcement of these closures is part of a strategic plan that has been in development amongst Macy’s executives to find ways to both boost sales and decreases costs, ultimately maximizing profits. Other initiatives that will be seen as part of this plan include a more user-friendly online experience, more in-store events for customers, as well as an increase in partnerships to grow the number of brand-shops within Macy’s remaining locations.
Macy’s is not the only retail company closing their doors. With online sales numbers expected to hit close to $700 million dollars by 2020, consumers looking to shop from home or their mobile devices are making it harder for companies to keep doors open for brick and mortar locations. Other large retailers including Walmart and Sports Authority are both closing over 700 stores combined within the next year.
While the closures may not be favorable to those working in the yet to be announced 100 stores that will lose their jobs, analysts and investors were thrilled with the news, causing Macy’s stock to rise 17% on the day of the announcement to $39.81 a share. Just a few days later, the stock prices continues to rise, now over $40 per share, quickly approaching $41. Other similar department stores also saw their stocks soar that day, with Kohl’s coming in at a close 15% daily gain. Major mall owners such as General Growth Properties and Simon Property Group did not receive the news well, both dropping between 2% and 3% following the announcement.