Macy's is slashing jobs, a harbinger of hard times for retailers after a holiday season that saw a noticeable shift to online shopping and away from physical stores.
The nation's largest department store chain, which also operates Bloomingdale's, said late Wednesday it is cutting up to 4,800 jobs and trimming its profit outlook after a miserable holiday season.
"I think Macy's is likely to be a canary in a coal mine,'' said Ken Perkins, president of Retail Metrics, a retail research firm. He said retailers witnessed an acceleration of the shift toward online and mobile holiday spending in 2015.
About 2,110 of the job cuts at Macy's will come from reducing staffing at stores, eliminating duplications in back-office operations and consolidating regional store groups. The remaining 2,710 job cuts will come from the store closings that Macy's announced last fall, spokesman Jim Sluzewski said.
As of Wednesday, Macy's had about 163,000 workers.
More sophisticated shoppers
The moves are part of Macy's ongoing campaign to position itself to compete in a retail world where increasingly demanding shoppers are going back and forth between stores and their mobile devices. Analysts expect more retailers to announce they're shrinking their store counts further and making other moves to make their organizations leaner.
With store traffic down, stores had to discount more. Mother Nature also hurt holiday sales too, particularly at clothing stores. Unseasonably warm weather in some regions in the U.S. squelched shoppers' demand for cold-weather goods. Perkins expects fourth-quarter earnings to increase a meager 0.3 percent for the 119 retailers he tracks, compared with a 12.5 percent increase a year ago.
Macy's, which has corporate offices in Cincinnati and New York, says sales at existing stores and excluding licensed departments fell 5.2 percent in November and December. It said that the warm weather was the biggest culprit. That forced Macy's to step up discounts to clear out mounds of merchandise. Business was also hurt by lower spending by international tourists.
But, like other retailers, Macy's is also contending with broader changes in spending habits.
New spending patterns
Macy's had been a stellar performer since the recession as it localized merchandise, cut costs and developed exclusive brands that set itself apart from others. But increasingly, Amazon.com and other online rivals are becoming a threat. It also has acknowledged that customers are spending more of their money on experiences like eating out and spas, instead of on clothing. And when they do buy fashions, they are more likely to buy name brands at fat discounts at such stores like T.J. Maxx.
In response, Macy's has been working hard to expand its online services while pursuing new growth opportunities. It purchased upscale beauty brand Bluemercury last year and made its first foray into discount stores under Macy's Backstage to go head-to-head with T.J. Maxx.
"In some cases, there will be short-term pain as we tighten our belt and realign our resources,'' said Terry J. Lundgren, chairman and chief executive at Macy's Inc. in a statement. "But our eye is on a long-term vision of Macy's Inc. as a dynamic retailer that serves existing customers and acquires new ones through innovative approaches.''
Online business up
Lundgren said that the company is buoyed by a strong performance in its online business. For the November and December period, Macys.com and bloomingdales.com filled nearly 17 million online orders, up 25 percent from the same year-ago period.
The company also listed Wednesday which 40 Macy's stores it would close or had closed. It had announced plans to close stores in September. Of the 40, 36 will close in early spring. The other four closed last year. Before the closures, the company had 770 stores under the Macy's name in the U.S.
Macy's said Wednesday that it now expects its profit for its fiscal fourth quarter and full year, which run through January, to fall short of its previous estimate.
The company's shares rose more than 3 percent to $37.40 in extended trading Wednesday, after falling more than 2 percent to $36.15 in regular trading. Macy's shares have lost more than 44 percent in the last 12 months.