Macy's rejects purchase offer 1:10

(CNN) --

Macy's is working on a new, smaller but more luxurious version, designed to turn around the struggling retailer and keep its century-old brand up to speed with shoppers' rapidly changing demands.

First, Macy's will have to downsize.

The company is going to close 150 underperforming stores: 50 by the end of 2024 and the other 100 in the coming years.

By 2026, there will only be 350 Macy's stores, the company announced.

Secondly, the company will focus on its successful brands Bloomingdale's and Bluemercury, luxury stores that have surpassed the results of the Macy's brand.

In the coming years it will open more stores of this type, in smaller versions.

Macy's strategy reflects a shift in American retail and shoppers.

As the middle class has shrunk in recent decades, the retail market has splintered: low-end, savings-focused stores like Walmart have done especially well.

But so have luxury brands, as shoppers with means have been able to maintain their spending, despite higher prices.


So Macy's is chasing wealthier shoppers with luxury brands such as Bloomingdale's and Bluemercury, and is downsizing some of its department stores that primarily serve middle-class customers.

Macy's will also build 30 smaller stores over the next two years outside of malls, reflecting a trend of consumers choosing smaller stores outside of closed centers.

Smaller stores are also more profitable for Macy's because they have fewer workers and less merchandise.

Fighting for the future

The strategy is designed to fend off activist investors and boost the company's moribund stock price and sales.

Macy's and the entire department store industry have been hit from all sides in recent years.

Department stores have come under pressure from the rise of Amazon, the growing strength of discount chains such as TJ Maxx and online brands.

Macy's stock price has fallen 75% from a high of $73 per share in 2015. Since then, it has closed nearly 300 stores, nearly a third of its locations, but continues to operate about 700 across all its brands.

Last month, Macy's announced that it was laying off about 3.5% of its workforce, about 2,350 employees.

The company's difficulties have attracted the attention of activist investors.

Last month, Macy's rejected an unsolicited $6 billion offer from an activist investor seeking to take the famous department store private.

The activist group is attacking Macy's again, starting a proxy fight to gain control of the board of directors.

Macy's shares were down slightly in pre-market trading.

"We believe that reducing Macy's store base to a more manageable (and profitable) size is prudent given the overall structural shift toward online spending and away from department stores," retail analyst Dana Telsey said in a statement. note to clients.

A new image for Macy's

New CEO Tony Spring said in a statement that the "bold new chapter," which has the full support of the company's board of directors, was developed after extensive market research and will revitalize the Macy's brand.

Specifically, the new strategy will focus on improving Macy's digital store and reducing its offering.

"We are taking the necessary steps to revitalize our customer relationships through enhanced shopping experiences, relevant assortments and compelling value," Spring said in a statement.

Spring said Macy's will improve customers' shopping experience by focusing on the brands and items that shoppers say they want.

And Macy's, a high-end brand that has struggled with rising prices in recent years, said it would focus on "compelling value."

This should lead to sustained earnings growth over time, Spring predicted.

The company said that as it closes Macy's stores, it will open new stores for its luxury brands.

Macy's announced it will open 15 new Bloomingdale's stores and 30 new Bluemercury stores over the next three years.

It also plans to remodel 30 existing Bluemercury stores.

"Bloomingdale's expansion may work, as there are several strong luxury markets in which the chain is not represented," Neil Saunders, an analyst at GlobalData Retail, said in a note to clients.