Macy’s takes axe to middle management in sweeping restructure

By guest authors Jordyn Holman and Kim Bhasin, Bloomberg News

Macy’s Inc. is getting rid of several middle management positions as part of the department store chain’s dramatic restructuring aimed at surviving in an altered retail landscape.

Macy’s Chief Operations Officer John Harper is cutting the positions throughout the organisation as well as removing a team at district level, he said in a memo sent to employees and viewed by Bloomberg News.

Macy’s said on February 4, 2020, that it would shut 125 department stores — amounting to about a quarter of its locations — in one of its biggest moves yet to improve its business. The closures, including 30 already being shuttered, account for about US$1.4 billion in annual sales and will lead to about 2,000 job losses, about 9 per cent of its workforce. Macy’s will also consolidate its headquarters by closing one in downtown Cincinnati.

“Our business is evolving, and in order to stay competitive we need to think differently about how we operate,” Harper said in the note. “To support this transformation, we took a hard look at the structure of our organization, and made some changes to help set us up for future success.”

A representative for Macy’s did not have immediate comment.

Painful Changes

Macy’s is also closing a call centre in Tempe, Arizona, and moving its technology operations to New York and Atlanta from San Francisco. The company will transfer its corporate and support teams and its off-price offering Backstage to Long Island City starting in March. The merchandising teams will stay in Herald Square, the location of a flagship store.

The retailer is also moving from a district to regional structure, with store managers reporting straight to regional directors or their deputies. The retailer’s district merchant team has been eliminated entirely. The positions of district directors of operations, regional logistics directors and regional directors of selling support services and district facilities managers have all been eliminated. Assistant store manager positions will no longer exist in almost all stores.

“We are making deep cuts in almost every area of the business,” Chief Executive Officer Jeff Gennette said in a separate internal memo described to Bloomberg News.

Increase Simplicity

Macy’s had spent decades acquiring local department store chains, adding geographic reach and stores to its portfolio. In recent years, it has struggled with its large stores in underperforming malls and excess inventory.

The structural changes, which include giving store managers more authority, “reduces layers to increase simplicity, the speed in which we operate, and provides a pathway for clear decision making,” Harper said in the note.

“These changes are painful, but they are necessary,” Gennette said during an investor day at the New York Stock Exchange on Wednesday. “The retail environment is moving faster than we are.”

Macy’s to Close Almost Half the Story Shops it set up Last Year

Macy’s Inc. is scaling down Story, the experiential shop within-a-shop it introduced to significant fanfare less than a year ago.

Caption courtesy by Bloomberg Business News

The department-store chain will close almost half of the 36 Story locations it set up in Macy’s stores in 2019, according to a statement. The company will retain 20 of the shops including at its Herald Square flagship in New York and will give a further update to its strategy for the retail concept in April, it said.

“The goal was to spend the first year understanding customers and the new brand so that we could learn, iterate and innovate,” the company said in a statement. “We have learned a great deal about what our customers are looking for from an in-store experience, and Story will remain an important part of Macy’s gifting strategy.”

Macy’s acquired Story, founded by Rachel Shechtman, in 2018 before introducing it the following year in April. The idea was to make shopping about more than just buying things and lure back consumers increasingly drawn to online options. Shechtman now oversees Macy’s new smaller store format called Market by Macy’s, which opened in Dallas this week.

Macy’s is undergoing several structural changes as it seeks to adapt to a new era of retail. On Tuesday, it said it will close 125 stores in the next three years and cut 2,000 jobs, among other consolidation steps and efforts to reduce layers of management.

The Story shop at Herald Square currently occupies a 7,500 square-foot space filled with knickknacks. Chief Executive Officer Jeff Gennette has described the items as things “nobody needs” but are “going to want” once they walk through. The concept is a “success story” that offers insight into consumer behaviour, he said in an interview on February 5, 2020.