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The fallout of the sales collapse at Macy’s brought on by the COVID-19 pandemic continued on Thursday as the department store chain announced thousands more job cuts.
Macy’s, the largest U.S. department store company, said it was eliminating some 3,900 salaried jobs, ranging from buyers to regional managers to administration, in addition to a previous round of layoffs announced in February. The company is also trimming staffing at stores as it adjusts to a prolonged period of lower sales. In its first fiscal quarter, when all of its stores were closed for six weeks, sales fell 45% and its operating loss was around $1 billion. Macy’s will report full quarterly results next week.
While the bulk of Macy’s stores have reopened, and business is recovering gradually, the retailer’s sales are not likely to return to year-ago levels anytime soon, pressuring the company to further rein in costs.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward,” Macy’s chief executive Jeff Gennette said in a statement.
U.S. retail sales rebounded in May after a horrific April, but department stores benefited comparatively little from that upswing. What’s more, growing concerns about the big spike in COVID-19 infections in major markets such as Florida, Texas, and Arizona, where Macy’s operates many stores, along with new unemployment claims still exceeding 1 million a week have dampened expectations around retail’s recovery, especially for nonessential spending.
Macy’s moves will save it $365 million this year, or $630 million on an annual basis. The company has recently made a number of financial moves to bolster its cash position and access to credit by $4.5 billion to give it the breathing room that its smaller rivals J.C. Penney and Neiman Marcus, which both recently filed for bankruptcy protection, didn’t have.
A few weeks before the pandemic struck the United States, Macy’s had announced a splashy turnaround plan to become leaner, a smaller but better retailer, shedding 125 stores that last year brought in $1.4 billion and cutting 2,000 corporate jobs, while improving stores and refining its merchandise point of view. But that was only the latest such reorganization effort in the previous years as Macy’s has lost market share.
The department store chain also announced some initiatives at that February meeting designed to help keep some momentum it had regained during the previous holiday season, such as an expansion of its small-store concept debuted in Dallas and a modernization of its stores.
But for the foreseeable future, Macy’s will be in fire-extinguishing mode rather than reinvention mode, hurting its chances to stand out in a crowded field of competitors that have already siphoned away market share.
Rachel Shechtman, Macy’s chief brand experience officer overseeing many of its reinvention initiatives, is leaving the company, adding to the exodus in the past nine months of C-suite executives, including former president Hal Lawton, now CEO at Tractor Supply, and finance chief Paula Price.
