It wasn’t only UK retailers that had a tough Christmas. In the US, retail giant Macy’s has announced almost 5,000 job cuts and almost 40 store closures so it can make savings of around $400m after the holiday season was, well… miserable.
The company also slashed its earnings per share forecast again and said same-store sales for the full year will be lower than it previously expected.
The job cuts (totalling 4,800 with 2,710 of them having been previously announced) will be come from store staff, from back office ops, from a consolidation process for regional department stores and from those already-flagged closures.
While Macy’s has 163,000 employees making 4,800 a relatively small percentage, it’s still a tough time for those thousands of people set to lose jobs in what is an undeniably difficult retail environment.
So what exactly went wrong at America’s biggest department store chain?
Same-store sales fell 5.2% in November and December because, you guessed it… the weather was too warm. So cold weather clothing and accessories didn’t sell. That hurt margins as the company had to discount to shift its inventory.
While that accounted for around 80% of the fall, Macy’s said the strong dollar also meant lower spending by international tourists.
“In some cases, there will be short-term pain as we tighten our belt and realign our resources,” said company chief Terry J Lundgren.” But our eye is on a long-term vision of Macy’s Inc. as a dynamic retailer that serves existing customers and acquires new ones through innovative approaches.”
And a long-term vision is really needed as Macy’s is having to face up to a changed environment. While chains can boost their online ops, they’re still facing pureplay e-tailers like Amazon that are rewriting the retail rules, especially around holiday season spending.
Changes in customer thinking are also a problem – shoppers now are devoting more cash to ‘experiences’ than physical products and when they do buy products, they expect them to be at bargain prices. The full-price selling window for the holiday season isn’t exactly closed but its opening is tiny.
Macy’s is responding to all this with a boost to its online ops, the purchase of new businesses and opening discount stores like Macy’s Backstage. But we seem to have settled into a pattern in recent years where each holiday season throws up new scenarios and new sets of challenges. Let’s hope the changes Macy’s making will set it up for obstacles it’ll have to face in 2016.
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