Macy's to close 150 stores as part of plan to boost growth and revitalize brand

By Tomi Kilgore and James Rogers

Macy's books a $1 billion charge, primarily for planned store closures over the next three years

Shares of Macy's Inc. fell Tuesday after the department-store chain announced a plan to revitalize its business that includes closing 150 stores and that resulted in a $1 billion charge.

Macy's said the plan also includes monetizing up to $750 million worth of assets. In a separate release, Macy's reported fourth-quarter results that beat expectations.

"A bold new chapter serves as a strong call to action. It challenges the status quo to create a more modern Macy's Inc.," Chief Executive Tony Spring said on a call with analysts Tuesday. "We are making the necessary moves to reinvigorate relationships with our customers through improved shopping experiences, relevant assortments and compelling value."

The stock (M) fell 2.6% in premarket trading.

Macy's said the goal of the plan is to revitalize its sales assortment, modernize its shopping experience and bolster its position in the luxury market, where the company's Bloomingdale's and Bluemercury store brands have been outperformers.

Regarding store closures, Macy's said it is looking to close 150 "unproductive" stores through 2026, including 50 by the end of the current fiscal year. The company also plans to increase investments in about 350 "go-forward" stores and continue the expansion of its small-format stores.

Spring said that in fiscal year 2023, the 150 "non-go-forward" locations represented about 25% of the company's gross square footage in fiscal 2023 but less than 10% of sales.

"We have looked at value to operate versus value to close," he said, adding that Macy's has also looked at demand in the affected locations.

"The value to monetize is greater than the value to operate in these stores," said Spring, who was taking part in his first conference call since becoming Macy's CEO earlier this month.

Over the next three years, Macy's also plans to "rationalize and monetize" its supply-chain assets, which could lead to the monetization of $600 million to $750 million worth of assets.

For the fiscal fourth quarter to Feb. 3, Macy's reported that it swung to a net loss of $71 million, or 26 cents a share, from $508 million, or $1.83 a share, in the same period a year ago.

Excluding nonrecurring items - such as the $1 billion charge, of which about $950 million is for store closures over the next three years - adjusted earnings per share came in at $2.45, which was well above the FactSet consensus of $1.98.

Total revenue fell 2.4% to $8.38 billion, but that was still above the FactSet consensus of $8.09 billion. Same-store sales, or sales of stores open at least a year, fell 5.4%, to miss expectations of a 4.7% decline.

For the current full fiscal year, the company expects adjusted EPS of $2.45 to $2.85, while the current FactSet consensus is for $2.77.

Macy's stock has run up 29.5% over the past three months through Monday, while the SPDR S&P Retail exchange-traded fund XRT has rallied 17.8% and the S&P 500 index SPX has advanced 11.4%.

-Tomi Kilgore -James Rogers

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

02-27-24 0918ET

Copyright (c) 2024 Dow Jones & Company, Inc.