Macy’s is accelerating its store closure plans, announcing it will shut down 65 locations this year—an increase from the 50 closures previously scheduled for the fiscal year. This move is part of the company’s larger strategy to eliminate around 150 underperforming stores over the next three years.

The update was shared during Macy’s third-quarter earnings call on Wednesday.

Post-Holiday Closures Expected

“We now expect to close roughly 65 locations this year,” said Macy’s CEO Tony Spring. He added that the closures would occur after the holiday shopping season.

The announcement comes as Macy’s addresses broader challenges within the retail industry, including dwindling mall traffic and rising online shopping trends.

Accounting Scandal Revealed

Macy’s had delayed reporting its third-quarter earnings after uncovering a $151 million accounting error tied to small-package delivery expenses. An independent investigation found that a single employee intentionally falsified accounting records and documentation.

Adrian Mitchell, Macy’s COO and CFO, clarified that the issue did not involve theft and had no impact on revenue, cash flow, or inventory, as all vendors were fully paid. The company is now revamping its financial reporting controls to prevent future issues.

Department Stores Face Industry-Wide Challenges

Macy’s closures reflect broader struggles in the retail sector. With fewer customers visiting physical stores, U.S. retailers have announced over 7,100 store closures by the end of November 2024—a 69% increase compared to the same period last year, according to CoreSight Research.

The number of retail bankruptcies has also surged, with 45 retailers filing for protection in 2024, compared to 25 in 2023.

Largest Retail Store Closures in 2024

The retail chains leading store closures in 2024 include:

• Family Dollar: 677 closures
• CVS Health: 586 closures
• Big Lots: 580 closures
• Conn’s: 553 closures
• Macy’s: 55 closures

Macy’s Strategic Shift

Despite challenges, Macy’s is focusing on growth through its Bloomingdale’s and Bluemercury brands. Over the next three years, the company plans to:

• Open 15 new Bloomingdale’s stores.
• Launch 30 new Bluemercury locations.
• Remodel 30 existing Bluemercury stores.

Stock Performance

Macy’s stock has dropped approximately 20% over the past year, reflecting investor concerns amid the company’s restructuring efforts and broader retail struggles.

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Macy’s has postponed the release of its quarterly earnings report after discovering that a former employee concealed $154 million in expenses over nearly three years. The company revealed that the employee, who is no longer with Macy’s, intentionally made false accounting entries to hide costs related to small package deliveries.

An independent forensic investigation was launched after the discrepancies were identified. Macy’s stated that the hidden expenses accounted for only a fraction of its $4.36 billion delivery costs over the affected period, but the severity of the issue warranted the delay. The company plans to release its earnings report on December 11.

No Broader Impact Found

Macy’s assured investors that the false entries did not affect its cash management or vendor payments. Thus far, the investigation has pointed solely to the former employee, with no evidence implicating others in the scheme.

Macy’s CEO, Tony Spring, emphasized the company’s commitment to ethical practices in a statement, saying, “While the investigation continues, we remain focused on serving our customers and executing a strong holiday season strategy.”

Financial Performance and Market Reaction

Following the announcement, Macy’s shares fell nearly 3% at the market open. The company also reported a 2.4% decline in quarterly sales, dropping to $4.7 billion. Macy’s attributed the decline to weaker performance in digital channels and cold-weather product categories, as much of the country experienced an unseasonably warm fall.

Retail analyst Neil Saunders from GlobalData Retail noted, “The drop in sales was expected, given the challenges in the middle-market segment and Macy’s struggles to stay competitive across its stores. It underscores the company’s overall decline.”

Efforts Toward Restructuring

In response to ongoing challenges, Macy’s is proceeding with plans to close hundreds of underperforming stores. Despite broader struggles, some divisions showed resilience: Bloomingdale’s reported a 1.4% sales increase, while the luxury beauty brand Bluemercury posted a 3.2% rise.

Earlier this year, Macy’s declined offers from private investors to acquire the company, opting instead to focus on its internal revitalization strategy.

As the investigation continues, Macy’s aims to rebuild investor confidence and position itself for success in the crucial holiday shopping season.

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