Macy's makes omnichannel play with sweeping reorganization

Summary:Macy's expects the changes, which include shuttering 14 underperforming stores, to generate savings of approximately $140 million per year.

By Natalie Gagliordi for Between the Lines | 

Department store chain Macy's announced a sweeping reorganization plan that includes shuttering 14 underperforming stores and a restructure of its marketing and merchandising operations.

Financially speaking, Macy's expects the changes to generate savings of approximately $140 million per year, starting in 2015 -- savings that the retailer hopes to reinvest in technology and other growth initiatives.

But looking at the bigger trend, the changes seem to be more closely tied to the omnichannel shopping habits of many Americans. For anyone familiar with the business of retail, omnichannel is a buzzword that has been around for the last couple of years, referring to the ability of a retailer to reach shoppers via multiple shopping channels.

But while many brands have been aware of the concept and the action it necessitates, very few of the legacy players have actually, or even successfully, implemented broad changes that can be seen as an attempt to go fully omnichannel.

"Our business is rapidly evolving in response to changes in the way customers are shopping across stores, desktops, tablets and smartphones. We must continue to invest in our business to focus on where the customer is headed - to prepare for what's next," said Macy's CEO and chairman Terry Lundgren, in a statement.

Macy's and its upscale sister chain Bloomingdales will heretofore operate with unified marketing and merchandising divisions focused on "a hybrid of store and online buying" designed to fuse the buying and marketing processes within each chain.

"Going forward, Macy's and Bloomingdale's will be better able to move more quickly and nimbly to select merchandise, assort inventories and serve total customer demand, no matter how, when or where the customer shops," Lundgren added.

In other words, by restructuring marketing and merchandising, Macy's is hoping to be more agile when it comes to choosing and presenting its merchandise across buying channels.

The two department store chains will also tweak their staffing of field and store operations to "facilitate growth and efficiency." The company also said it plans to increase its workforce in some functions and locations while decreasing in others.

As for the store closings, Macy's said the 14 soon-to-close stores account for approximately $130 million in annual sales, some of which is expected to be absorbed through nearby stores and online.

In a separate announcement, Macy's reported its same-store sales on an owned plus licensed basis rose by 2.7 percent in the months of November and December 2014 combined, compared to the same period last year. The company maintained its full-year 2014 earnings guidance of $4.25 to $4.35 per share. Analysts polled by Thomson Reuters expect the Macy's to earn $4.36 per share for the full fiscal year 2014.