Macy’s is doubling down on its e-commerce strategy, and closing physical stores is becoming a major part of that.
The department store announced on Thursday that it plans to shutter 10 locations in January as it reconsiders how it will close a batch of 60 stores. These closures are the remaining part of its plan to close a total of 125 stores in lower-tier malls by 2023, as outlined last year in the company’s Polaris strategy for growth.
“An omnichannel view has also highlighted the need for us to take a second look at the timing of when we close the approximately 60 remaining stores we previously planned to close as part of Polaris, those markets that are performing best in aggregate, including many of the stores previously slated for closure,” said Macy’s EVP and CFO Adrian Mitchell. “With this in mind, we are considering the following points as we approach the optimization of our store portfolio.”
The reason for the delay, Mitchell explained, is that regions with physical stores often experience a higher level of omnichannel growth, which is important for digital sales. Delaying store closures for a little longer allows Macy’s to maintain a presence to grow omnichannel sales before leaving a location for good.
Still Macy’s expects to close 10 stores in January, representing the company’s desire to lean into digital sales that outpace those in physical stores.
In a call with investors, Macy’s CEO and chairman Jeffrey Gennette said the company’s digital business is on track to generate $10 billion in sales by 2023, excluding revenue expected from a new marketplace platform that the company plans to launch in the second half of 2022. This platform will allow third-party merchants to sell their products via Macys.com and Bloomingdales.com, offering an expanded assortment of products across multiple categories.
As Macy’s digital business soars, shareholders are pressuring the company to bolster its digital arm, with some even suggesting that the retailer split its online and store businesses to capitalize on an impressive digital growth in the last few quarters. Saks Fifth Avenue parent company Hudson’s Bay Co. did this in March. And according a report in Sourcing Journal, Macy’s Inc. recently hired the person behind this split, suggesting the potential for a similar move down the line.
Despite the focus on digital, Macy’s executives still see the value in strategically located physical stores. The goal is to combine the positive elements of both.
“We spent about a year really trying to understand what the future footprint of our business will look like,” Mitchell said. “And part of that is for us to focus on creating a growing and profitable omnichannel ecosystem that is a combination of our existing best malls or off-mall stores operated by digital experience.”