Macy’s, Inc. (M) Announces Cost-Cutting Initiatives and Store Closings

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Shares of Macy’s, Inc. (NYSE:M) are up significantly in the after hours this afternoon as the company has announced major cost-cutting initiatives and details on upcoming store closures. In an effort to reduce selling, general and administrative expenses by as much as $400 million, the company will be making numerous changes through the first half of 2016.

Most importantly these changes include the consolidation of the grouping of Macy’s stores into 4 regions and 47 districts, adjusting staff levels at each Bloomingdale’s and Macy’s stores to bring them more in line with their respective sales volumes, and reducing over 600 back-office positions.

“In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations. Moreover, we believe we can operate more effectively with an organization that is flatter and more agile so we can pursue growth and regain market share in our core Macy’s and Bloomingdale’s omnichannel businesses faster and with more intensity. We will continue to invest in strategic initiatives that anticipate emerging customer needs and create shareholder value,” said Terry J. Lundgren, chairman and chief executive officer of Macy’s, Inc. “The cost efficiencies represent more than two-thirds of our goal of annual SG&A expense reduction of $500 million, net of growth initiatives, from previously planned levels by 2018. In some cases, there will be short-term pain as we tighten our belt and realign our resources. 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 to the marketplace.”

Macy’s, Inc. (NYSE:M) also has listed a total of 40 stores which will be or have closed, representing over 5% of their total store locations. Four of these stores have already closed, and the remaining 36 will shut down by early spring. The stock decreased 2.22% or $0.82 during the last trading session, hitting $36.14. About 11.64M shares traded hands or 34.41% up from the average. M has declined 46.04% since June 2, 2015 and is downtrending. It has underperformed the S&P500 by 41.34%.

From a total of 23 analysts covering Macy’s Inc. (NYSE:M) stock, 7 rate it a “Buy”, 2 a “Sell”, and 14 a “Hold”. This means that 30% of the ratings are positive. The highest target price is $139.0 while the lowest target price is $38. The mean of all analyst targets is $61.73 which is 70.81% above today’s ($36.14) stock price. Macy’s Inc. was the topic of 35 analyst reports since July 24, 2015 according to the firm StockzIntelligence Inc. Goldman Sachs downgraded shares on December 4 to a “Neutral” rating. Barclays Capital maintained shares with a”Underweight” rating and a $38 target share price in their report from a November 12. Evercore downgraded M stock in a recent report from November 12 to a “Hold” rating. Cowen & Co maintained the rating on November 12. Cowen & Co has a “Market Perform” rating and a $42 price target on shares. Finally, Stifel Nicolaus maintained the stock with a “Buy” rating in a report they issued on a November 12.

Macy’s, Inc. is an omnichannel retail firm operating stores, Websites and mobile. The company has a market cap of $11.69 billion. As of January 31, 2015, the activities of the Company included 823 stores with an area of approximately 147,400,000 square feet in 45 states of the United States, the District of Columbia, Guam and Puerto Rico. It has 9.49 P/E ratio. Of these 823 stores, 447 were owned, 267 were leased and 109 stores were operated under arrangements where the Company owned the building and leased the land.

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