Macy’s to close 150 underperforming stores across the U.S. by 2026, including flagship San Francisco store

 Retail giant Macy's is set to close 150 underperforming stores nationwide over the next three years as the chain works to stay relevant in the ever-evolving retail industry.

The iconic department store chain has decided to cut off around 30 percent of its current fleet, including its flagship store in Union Square, San Francisco, to focus on upgrading the remaining 350 shops, opening 30 smaller ones outside malls and adding 15 Bloomingdale’s outlet stores and 30 new Bluemercury stores. The closures will represent about a quarter of Macy's gross square footage, but less than 10 percent of its total sales.  Macy's, the parent company of luxury department store chain Bloomingdale's and chain cosmetics store Bluemercury, anticipates generating $600 million to $750 million in savings from these store closures by the end of 2026. The proceeds will be reinvested to fund remaining stores, fuel future expansion and modernization efforts and revitalize Bloomingdale's and Bluemercury.

New Macy's CEO Tony Spring, who was previously the CEO of Bloomingdale's, outlined the strategy as Macy's reported that it met its sales estimates and exceeded earnings forecasts for the holiday quarter. He clarified that "this isn't just about shrinking." Instead, he wants the department store chain to give customers a chance to "shop the way they want."

“This is about resizing the portfolio to make sure we are giving people an opportunity to shop the way they want," Spring said.

Spring, who used research conducted among 60,000 American consumers over the past years, plans to enhance the shopping experience by adding sales associates to fitting rooms and shoe departments. The company will also focus on visual merchandising, including the introduction of more mannequins and fine-tuning details such as the optimal display methods for different clothing items.

Big department stores are not as attractive as they used to be

Macy's Inc. used to be a big chain made up of several regional department stores across the United States.

In 2019, the company had about 870 stores, including 643 Macy's locations. However, new competitors have been better at attracting new and younger shoppers, while large stores like Macy's have become old, underused or located in retail areas that aren't popular for shopping.

Previous CEOs tried to work it out and make the company smaller by closing some stores, but it didn't always work well.

In January, Macy's cut 13 percent of its corporate staff and announced the closure of five stores. The costs of making these changes caused Macy's to lose $71 million in the fourth quarter, compared to making a profit of $508 million the previous year. But then, sales during the 2023 holiday season were also reportedly down compared to the previous year.

This, in turn, reflects the challenges faced by traditional retailers amid growing online competition.

Ray Wimer, a professor of retail practice at Syracuse University, acknowledged Macy's and other retail giant's current status.

"They've been trying to restructure and find strategies to find a path to success into the future. Right now, there's just so much competition. The really big department store in many areas of the country is not as attractive as it used to be," Wimer said.

He suggests that companies should create smaller, more efficient spaces to enhance the shopping experience of customers.