Macy's is one of the most iconic U.S. retailers. The department store dates back to the mid-1800s, and for generations shoppers have relied on the trusted name for everything from clothing and shoes to bedding and dinnerware. However, according to insiders, the traditional Macy's—which so many of us know and love—is now "melting away." But in reality, that might not be such a bad thing.
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In an earnings release last week, Macy's announced its fourth quarter and full-year financial results, with in-store sales down 5 percent and digital sales down 7 percent in 2023. The decline of Macy's namesake brand was particularly noticeable, as comparable sales fell 6 percent in the fourth quarter. (The company also owns Bloomingdale's and Bluemercury, where sales were down, but not nearly as much.)
While the numbers were somewhat glaring, in a separate press release, Macy's announced its "Bold New Chapter" strategy. According to Macy's new CEO Tony Spring, the plan is "designed to create a more modern Macy's, Inc. that is expected to generate meaningful values for our shareholders in the years ahead." It involves streamlining operations; "modernizing the shopping experience...with continued focus on digital excellence"; closing 150 "underproductive" Macy's stores; and opening new Bluemercury and Bloomingdale's stores.
Speaking with Yahoo Finance, Spring further emphasized that these changes are necessary for Macy's.
"We are not going to leave Macy's as it is today," Spring told the outlet. "It's foolhardy to think that leaving the business as it exists today is a recipe for success in the future."
However, private equity firm Arkhouse (one of the department store's activist shareholders) has been "frustrated" with Macy's Board of Directors after it rejected Arkhouse's and Brigade Capital Management's $5.8 billion bid to take the company private. On Feb. 20, the companies upped the ante, offering a $6.6 billion bid.
Looking at Macy's as a whole, Arkhouse believes more fundamental change is necessary to keep the business afloat.
"Incremental changes related to digital display systems, merchandising, or even store closures have been tried before and are unlikely to deliver any material value to shareholders," Arkhouse's managing partner Gavriel Kahane told Yahoo News. "They have their eye on marginal improvements. While they're focused there, their company is melting away."
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According to Kahane, Macy's executive team and board are interested in small improvements rather than bigger-picture adjustments. He told Yahoo Finance that their focus is on "the sprinkles and the cherry, as opposed to the bowl of ice cream."
However, Spring—who Yahoo Finance notes has not commented often on the unsolicited bids—contends that current plans will make it easier to shop both online and in-store at Macy's. And unlike Sears, the Macy's franchise isn't "distressed."
"It's a franchise that just needs to be modernized,” Spring said.
For their part, Wall Street analysts are somewhat divided on the department store's potential. Neil Saunders, managing director of retail at GlobalData, told Yahoo Finance that "the jury's still out" on whether Macy's will bounce back following planned changes. Morningstar analyst David Swartz also told the outlet that while Macy's is currently the largest department store chain in the U.S., there is "some concern" about the company's shrinking size, revenue, and store footprint.
"Closing 150 stores runs the risk of losing customers that may never come back," Swartz said. "So it's unclear whether there's really any growth plan in Macy's at all."
