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Macy's said these are the five areas where it plans to invest in 2019

Key Points
  • Macy's announces a new restructuring plan on Tuesday.
  • It plans to invest in five key areas in 2019.
  • But the retailer still has its fair share of challenges ahead of it, as department stores are under pressure.
Scott Olson | Getty Images

Macy's says it will act with speed in 2019. But it could be too late.

The department store chain on Tuesday announced a restructuring plan, where it will cut jobs and make other structural changes to its business with the goal of saving $100 million annually to spend on growth initiatives.

"We've certainly shown ... with the initiatives that we put in place in 2018 that we're going fast," CEO Jeff Gennette told analysts and investors. "We're operating with speed. And what I would tell you is that our vendors are rooting for us."

Still, Macy's can't ignore the state of retail today. Shoppers are increasingly ringing up purchases online, and fewer are flocking to shopping malls on the weekends to browse for handbags and clothes. Many of the brands found within Macy's stores — such as Nike and Coach — have caught wind of this, and so they've shifted to opening more of their own standalone stores and building out their own websites. Macy's, in turn, has been left with a portfolio of more than 600 department stores across the U.S. and the task of keeping them relevant.

On Tuesday, Macy's said it will spend the most money in 2019 on five areas, with the goal of growing sales and improving profitability. One area is its so-called Growth150 plan, where Macy's has been outfitting some of its most profitable stores with new lighting, fixtures and merchandise. It plans to tap another 100 locations with those upgrades in 2019.

Second is Macy's Backstage, the retailer's off-price business that competes with the likes of TJ Maxx and Nordstrom Rack, selling heavily discounted apparel and home goods. Macy's opened 120 Backstage locations within existing Macy's shops last year. It plans to open 45 more this year and says sales at Macy's stores with Backstage shops inside are up 5 percent, on average.

Macy's at Chula Vista Center prepares for the Grand opening of its off-price shopping experience, Macy's Backstage, on Wednesday, Sept. 12, 2018 in Chula Vista, Calif.
Stephanie Diani | AP

Then, Macy's said it will work more closely with top vendors this year with the goal of getting hot items to market more quickly. It's faced with growing competition from an onslaught of digital-first brands that sell directly to consumers — such as Warby Parker, Outdoor Voices and Allbirds — to keep its assortment of goods in stores and online fresh.

Fourth, the company said it will think "mobile first" and continue to update its app. Mobile is the retailer's fastest-growing channel for sales today, Macy's said. It reached $1 billion in mobile sales last year.

And lastly, Macy's said it will invest in the categories where it believes it can gain the most market share: dresses, fine jewelry, women's footwear and beauty. It could stand to take some market share as rivals Sears and J.C. Penney falter.

"We are a stronger company than we were a year ago," Gennette said on Tuesday.

But Macy's still has its fair share of challenges ahead of it.

One of the biggest challenges is figuring out what to do with all of its real estate. The company has been evaluating other uses for some of its flagship locations, including the iconic Macy's store in Herald Square in New York. On Tuesday, Gennette said the company is in the process of holding "preliminary meetings with city officials and community stakeholders" to discuss "complementary uses" at the Herald Square shop.

Then, Macy's must still find ways to ease pressure on profits. The new restructuring plan should help with that. But Macy's said it expects inventory to creep back up this spring. And that could push the company to rely on promotions to get rid of it.

Macy's shares were up just about 1 percent by Tuesday afternoon. The stock has dropped nearly 18 percent already this year. That's compared with the S&P 500 Retail Index, which has risen nearly 11 percent over the same time period.

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