Macy’s coffers caught a pre-holiday chill as warmer weather cut into sales of winter wear in November and December—and its staff is paying the price.
The department store retailer on Wednesday announced that it will cut thousands of jobs and shutter 36 stores as part of a plan to reduce annual expenses by $400 million.
About 3,000 associate jobs will be eliminated at Macy’s and Bloomingdale’s stores nationwide, while a “voluntary separation opportunity” will be offered to around 165 senior executives who meet certain age and service requirements. Additionally, 600 back-office positions will be cut and a further 750 workers will be laid off when the retailer closes its call center in St. Louis, Missouri, this spring.
Some of the affected employees are expected to be placed in other positions.
“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,” Terry Lundgren, the company’s chairman and chief executive officer, said in a statement.
The news came as Macy’s revealed a 4.7% decline in same-store sales on an owned-plus-licensed basis during November and December combined, compared with the same two-month period last year.
On an owned basis alone they fell by 5.2%.
“The holiday selling season was challenging, as experienced throughout 2015 by much of the retailing industry,” Lundgren said, noting that Macy’s and Bloomingdale’s stores in the north of the country were “particularly disadvantaged” by unseasonable weather in November and December.
He added, “About 80 percent 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.”
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The strong dollar didn’t help matters either, as the retailer felt the brunt of lower spending by international tourists.
The one bright spot in the last two months of 2015 appeared to be e-commerce, as Macys.com and Bloomingdales.com received nearly 17 million online orders—a new record for the company, Lundgren said, and a 25 percent increase over the same period last year.
“This validates the strength of our omnichannel strategy and related investments which we made over the past decade and will continue into the future,” he noted.
With that being said, Macy’s isn’t expecting much to change in January and is anticipating a fourth-quarter decline in same-store sales on an owned-plus-licensed basis to be around 4.7%, down from previous guidance of between 2 and 3 percent.
To that end, the retailer slashed its full-year guidance for 2015 from a 1.8-2.2% decline in same-store sales to roughly 2.7%, while it’s anticipating earnings per diluted share to be in the range of $3.85 and $3.90, compared with previous guidance of $4.20 to $4.30.
It also revealed the 36 Macy’s stores it plans to shut in early spring, in addition to the four that closed in the third quarter, consistent with the company’s announcement in September that it would close as many as 40 underperforming locations. The affected stores account for around $375 million in annual sales, some of which are expected to be retained in nearby stores and with e-commerce and mobile sales.
Lundgren continued, “In today’s rapidly evolving retail environment, it is essential that we maintain a portfolio of the right stores in the right places. So we will continue to add stores selectively while also being disciplined about closing stores that are unproductive or no longer robust shopping destinations because of changes in the local retail shopping landscape.”