Macy's shares tumbled more than 9 percent after the market's close Wednesday after it posted disappointing holiday sales and released the locations of 68 of the 100 stores it plans to close as it looks to turn around its performance.
Macy's comparable sales fell 2.1 percent in November and December, which was at the low end of its previous guidance. It maintained its 2016 comparable sales guidance of a 2.5 percent to 3 percent decline, but expects full-year diluted earnings to be in a range of $2.95 to $3.10. It had previously been expecting $3.15 to $3.40.
Macy's outgoing Chairman and CEO Terry Lundgren said the company expects "our 2017 change in comparable sales to be relatively consistent with our November/December sales trend."
Macy's shares recently changed hands at $32.60, down $3.24, or 9 percent.
As part of Wednesday's announcement Macy's said it will eliminate layers of management to cut costs and make more agile decisions. It also will work to reduce other non-payroll costs. As a result of these steps, the company estimates its work force will be cut by 6,200.
Another 3,900 workers will be displaced by the store closures and some of these employees could be reassigned.
The store closures are an attempt to reverse the downward slide in sales at its established shops, and they make good on a promise fromAugust, when the department store chain said it would close a chunk of stores to focus on its best-performing locations and its website.
As part of a strategy to streamline its portfolio, Macy's moves will save the company an estimated $550 million a year starting in 2017. The company will use these proceeds to invest an additional $250 million in its digital business, as well as the growth of its Bluemercury beauty shops, Macy's Backstage off-price stores, and China.
The company expects to record about $250 million of charges, or 50 cents per share, in fourth quarter 2016. These charges were not previously included in its earnings forecast and are in addition to the $249 million recorded in the second quarter as an estimate of asset impairment and other charges primarily related to 2016 store closings.
Fellow department store chain Kohl's also lowered its forecast for 2016 amid soft holiday sales, and now expects diluted earnings per share to between $2.92 and $2.97, short of its prior estimate of $3.12 to $3.32. Its comparable sales also fell 2.1 percent in November and December.
The weak performance at the department stores came despite recent reports that the industry's holiday season was shaping up to top previous estimates. Much of that success was driven by strong online sales growth and a burst of last-minute purchases.
Of the 68 stores Macy's is closing, three were shuttered mid-year, 63 will be closed in early spring, and two will be closed in the middle of the year. Three other locations were sold, or will be sold, and are being leased back. (A full list of planned store closures is below.)
As a result of the 63 store closures in early 2017, along with the three closed in the middle of 2016, the company's 2017 sales will take a roughly $575 million hit, the company said. That's after factoring in the sales it expected to retain in nearby stores and on the web.
The company will close about 30 additional stores over the next few years as leases or operating covenants expire or sale transactions are completed, the company said.
"We are closing locations that are unproductive or are no longer robust shopping destinations due to changes in the local retail shopping landscape, as well as monetizing locations with highly valued real estate," Lundgren said, in a press release. "These are never easy decisions, and we are committed to treating associates affected by these closings with respect and transparency."
Meanwhile, Macy's plans to open some 50 new Backstage locations inside existing Macy's stores, and about 50 Bluemercury specialty stores. Those shops will be both freestanding and within existing Macy's stores.
Internationally, a new Bloomingdale's store will open Kuwait this spring, and new Macy's and Bloomingdale's stores are will open in United Arab Emirates in 2018.
Under pressure by activist investor Starboard, Macy's has been taking steps to make money from its vast real estate empire.
In October, the retailer said it had sold five of its stores to General Growth Properties, including four that were offloaded in the third quarter for $46 million.
One month later, it said it had signed a contract to sell its men's flagship in San Francisco's Union Square for $250 million. At that time, it also disclosed that it had signed a contract to sell its downtown Portland, Oregon, store for $54 million. As part of the latest round of closures, Macy's said it has entered into an agreement to sell its downtown Minneapolis store to 601W Companies.
The retailer currently has 730 Macy's stores.
Macy's announcement comes just hours after Seritage Growth Properties, the real estate investment trust that was spun off from Sears, said the department store chain exercised its right to terminate the leases on 19 unprofitable stores. They are scheduled to close in April.
Seritage made a similar announcement in September, when Sears terminated the leases on 17 unprofitable stores. Those locations were slated to close in January.