Macy's Cuts Thousands of Jobs, Blames Weather for 80% of Sales Decline
Macy’s Inc.’s woes deepened after disappointing holiday sales prompted the department-store chain to cut thousands of jobs and hire more advisers to re-examine its real-estate holdings in markets including New York and San Francisco.
Sales at existing stores in November and December fell 4.7%, and the company said it expects the decline to continue this month. It would be the sharpest holiday period decline since 2008. The company had been expecting fourth quarter sales, which also includes January, to decline between 2% and 3%.
Macy’s is the first major retailer to release holiday sales figures, and its results are likely to reinforce concerns that the season was a challenging one, particularly for department stores which were burdened by excess inventory and a shift to Web shopping.
Terry J. Lundgren, Macy’s chief executive, said sales were crimped by unusually warm weather through much of the Northeast and by lower spending in its stores by international tourists due to the strong U.S. dollar.
“About 80% 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,” he said.
Macy’s has stumbled recently amid online pressures and off-price chains that sell similar goods at lower prices. It has responded by launching its own off-price chain called Macy’s Backstage, but analysts say it could take years for the format to meaningfully affect sales and profits.
“Macy’s and other mall-focused peers have been all but been crushed by the shopper migration to off-mall retailers such as off-price chains,” said Craig Johnson, the president of market-research firm Customer Growth Partners.
To adjust for the lower sales, Macy’s plans to eliminate about 4,800 jobs although some employees will be relocated to other positions in the company. About 2,700 of the job cuts will come from 40 stores to be closed.
Macy’s employed about 166,900 full-time and part-time workers as of Jan. 31, 2015.
The company currently operates about 770 Macy’s stores. The 40 stores it is closing includes locations from Kailua, Hawaii, to Hagerstown, Md., and represent about $375 million in annual sales, some of which the company expects to retain at nearby locations and through its online operations.