Macy’s Inc. (NYSE: M) is launching a new $1.5-billion cost-cutting plan to revive its business. Macy’s CEO Jeff Gennette said in a statement, “We are taking the organization through significant structural change to lower costs, bring teams closer together and reduce duplicative work. The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile and better fit to compete in today’s retail environment.”
As part of the plan, the company will be closing 125 stores across the nation over the next three years. Macy’s currently operates about 680 department stores under the Macy’s and Bloomingdale’s brands. According to the company’s statement, the stores to be closed are among the company’s “least productive,” accounting for a combined $1.4 billion in annual sales. Macy’s has shuttered more than 100 stores since 2015.
The company is also planning on shutting its joint headquarters in Cincinnati. New York will now become the company’s sole corporate headquarters. In addition to its site in downtown Cincinnati, the macys.com headquarters in San Francisco and offices in Lorain, Ohio will also close. It is also closing its Tempe, Arizona, customer contact center.
Another part of the plan is to move its technology operations from San Francisco to Atlanta and New York. According to a state labor filing, the technology move will involve 831 layoffs. Overall, the moves will be eliminating about 2,000 corporate jobs. The jobs being cut represent about 9 percent of its corporate workforce.
Macy’s expects the total costs related to these changes to be between $450 million and $490 million, the majority of which will be recorded in 2019. The moves are expected to generate annual gross savings of about $1.5 billion by the end of 2022, with roughly $600 million saved this year. Some of the savings will be invested into its better sites, including upgrading and refurbishing another 100 stores this year. Some of the money will be used to stabilize its operating margin this year.