Macy’s said it plans to close almost a third of its namesake US locations as the department-store chain seeks to fight off a pair of activist firms seeking to buy the company.

The company did not give an estimate of the number of employees that will be affected by the closures, which will happen over the next three years. Many of the stores are near other Macy’s locations, which could allow some workers to transfer. Macy’s also plans to add 15 new Bloomingdale’s and 30 Bluemercury locations by 2026 – an effort to accelerate growth of its higher-end brands. 

The announcement, accompanied by fourth-quarter results, follows a US$5.8 billion (S$7.79 billion) buyout offer from Arkhouse Management and Brigade Capital Management in December. Macy’s rejected the offer, but last week, Arkhouse nominated nine directors to Macy’s board as the activist investor persists in its efforts. 

In a slide presentation released after the results, Macy’s warned that it expects first-quarter earnings of 10 US cents to 16 US cents a share, far below the consensus estimate of 45 US cents compiled by Bloomberg. The stock reversed earlier gains to fall 2.5 per cent in early New York trading. Macy’s shares had fallen 4 per cent this year through Feb 26’s close.

Freeing assets

The new real estate strategy, which comes less than a month into the tenure of chief executive officer Tony Spring, is expected to free up between US$600 million and US$750 million of assets through 2026, the company said.

Fourth-quarter earnings of US$2.45 a share, excluding some items, beat the average analyst estimate and improved from a year ago. For the full year, Macy’s anticipates adjusted earnings of US$2.45 to US$2.85 a share, below the average analyst estimate of $3 and weaker than last year. The company’s net sales outlook was also below the average analyst estimate. Macy’s described 2024 as a year of “transition and investment”.

Same-store sales at the Macy’s namesake brand fell 6 per cent on an owned basis in the fourth quarter, while sales at the higher-end Bloomingdale’s fell 1.5 per cent. Bluemercury, which sells beauty and skin-care products, rose 2.3 per cent. While sales across the company were down from a year earlier, Macy’s beauty and off-price categories performed well during the holiday season. 

Macy’s, like many mall-based retailers, has struggled with a long-term shift in consumer behaviour that favours online and off-mall shopping. In 2020, just before the pandemic, the company announced a separate strategy, known as Polaris, which was meant to stabilise profitability and included a plan to close 125 stores. It ultimately closed about 85 stores.

Much of the company’s value is tied up in real estate. It currently operates 489 Macy’s stores, 32 Bloomingdale’s locations and 158 Bluemercury stores across the United States. By closing a further 150 Macy’s stores, the company will be able to prioritise investment in the remaining locations and continue to expand small format, off-mall locations, Macy’s said in a statement. BLOOMBERG