The department store chain projected the moves would save it $630 million a year.
The pandemic “has significantly impacted our business,” chief executive Jeff Gennette said in a statement. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business … We know that we will be a smaller company for the foreseeable future.”
Coronavirus-related store closures have led to a precipitous drop in sales that has roiled the retail industry, which was in trouble long before the pandemic. Six national retailers — including department store chains J.C. Penney and Neiman Marcus — have filed for bankruptcy since May. As many as 25,000 brick-and-mortar stores are expected to permanently close this year, according to Coresight Research, which will have far-reaching effects on shopping malls, workers and local communities.
Macy’s latest announcement, analysts say, shows that retail job cuts — which until now had been largely concentrated among store employees and hourly workers — are beginning to reach white-collar positions in office buildings.
“This is a significant number of layoffs and it really underlines the fact that while Macy’s has done a good job of securing financing to see it through this crisis, it is still burning through cash,” Neil Saunders, managing director at GlobalData Retail. “It is a long-term retrenchment, and an acknowledgment that sales are nowhere close to what they used to be.”
Analysts say Macy’s, though, is in relatively good shape. The probability that it will default on its loans in the coming year has declined from 44 percent in April to 17 percent in June, according to S&P Global Market Intelligence, as stores reopen and sales inch back up. Macy’s has also obtained about $4.5 billion in financing that Gennette said would make it “a more stable, flexible company.”
“Macy’s is doing what it can to quickly cut costs — which, in this case, means cutting corporate jobs,” Saunders said. “But the truth is, its costs are still way in excess of profits.”
The nation’s largest department store chain furloughed the majority of its 125,000 employees in mid-March, after coronavirus-related closures led to a steep decline in sales. Many of those workers are expected to return to work in July, as the company systematically reopens stores across the country.
The latest round of troubles comes on top of what was already a difficult time for the retailer. Annual sales fell 1.6 percent to $24.6 billion last year, as the company lost out to online competitors. In February, it said it would close offices in San Francisco and Lorain, Ohio, as well a customer service center in Tempe, Ariz., resulting in a 10 percent reduction of corporate and support staff.
Macy’s shares closed Thursday at $6.50, down 4.1 percent. The stock has lost more than 61 percent of its value year to date.