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Macy's The Three Point Plan

Macy’s announced a plan to save costs and raise capital to institute programs to turn their sales around.

Recently Macy’s announced a plan for 2017 to save costs and raise capital to institute programs to turn their sales around.

It’s no secret that this past year was not kind to brick-and-mortar retail department stores. Sales either declined or remained stagnant for most of the big players like Macy’s, Sears, K-Mart and the Limited thanks mainly to the continuing rise of internet shopping. 

The Three Point Plan 

  • An announced closing of 68 poor-performing stores across the country. These closures are part of the planned 100 store closing announced last summer. The goal is to have fewer stores that can present a better shopping experience for their customers. An estimated 10,000 jobs will be eliminated with these store closings.
  • Macy’s will restructure its corporate operations to concentrate on strategic priorities, improve the ability to react faster and to reduce overall expenses.
  • Selling the closing store locations to remain in line with the 100 store closings announced last August.

To regular Macy’s customers, the announcement of store closings should not be a surprise. To many, shopping at Macy’s during 2016 was like shopping at Macy’s in 2006. Nothing had changed. The selection of merchandise was nearly the same. 

Who’s to Blame?

It’s easy for department stores to entirely blame this dilemma on the rise of Amazon and internet shopping. Many retail analysts will tell you otherwise. It’s true that Amazon has made huge inroads into stealing department store customers. In the long run, however, chains like Macy’s have no one to blame but themselves.

In the classic movie King Kong, a character looks at the body of the giant gorilla and says, “It was love that slayed the beast.” In Macy’s case, it’s been complacency that has done the damage.

Department stores had plenty of warning that the internet was on the verge of changing our shopping habits. When sales associates first reported that customers were beginning to check prices on their smart phones and leaving the store to buy elsewhere, management failed to take notice and respond.

At its peak in 2006, Macy's operated approximately 850 stores in the United States and Puerto Rico. After the 100 stores have closed, there will be 597 stores remaining in the United States. 

When CEO Terry Lundgren announced he would retire in March of 2017, the news was welcomed and disappointing at the same time. Lundgren has done much to improve the Macy’s operation and has been a Wall Street favorite during his tenure. On the other hand, the erosion of sales and lack of action to compete with Amazon happened under his watch.

Change is good, most investors thought. But when the Macy’s board of directors decided to promote the current Macy’s President to the CEO position instead of bringing in someone new from the outside, many investors were disappointed. 

Macy’s isn’t the only department store chain closing stores. The Sears Company, the owner of Kmart and Sears stores, will close 80 Kmart stores and 42 Sears stores by April. J.C. Penny’s will also close stores in 2017 but have not announced the final number. And in a surprise move, women's apparel chain The Limited has begun closing all its 250 stores across the United States. 

Clothing, especially women’s clothing, has been Macy’s’ strong suit over the years. Here again, customers can now buy clothing on-line as easy or even easier than driving to a mall, finding parking, and walking store aisles. When Amazon projected their on-line clothing sales would exceed Macy’s projected sales, shock waves rippled through the retail industry. 

The Future 

Macy’s has not thrown in the towel by any means. Like Walmart and other retail chains, they are aggressively increasing their on-line exposure thorough their Macy’s on-line shopping site and the use of social media advertising.

Whether it’s a case of too little too late will be determined in the months and years ahead. 

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