Macy’s, Inc. Outlines Cost Efficiency Initiatives and Lists Store Locations to Be Closed

CINCINNATI–(BUSINESS WIRE)–Macy’s, Inc. (NYSE:M) today announced a series of cost-efficiency and
process improvement measures to be implemented beginning in early 2016
that will reduce SG&A expense by approximately $400 million while still
investing in growth strategies, particularly in omnichannel capabilities
at Macy’s and Bloomingdale’s. The actions represent progress toward the
company’s previously stated goal of re-attaining over time an EBITDA
rate as a percent of sales of 14 percent.

(Editor’s Note: Macy’s, Inc. this afternoon also issued a separate
news release announcing sales results for the November/December 2015
period and updating guidance.)

“In light of our disappointing 2015 sales and earnings performance, we
are making adjustments to become more efficient and productive in our
operations. Moreover, we believe we can operate more effectively with an
organization that is flatter and more agile so we can pursue growth and
regain market share in our core Macy’s and Bloomingdale’s omnichannel
businesses faster and with more intensity. We will continue to invest in
strategic initiatives that anticipate emerging customer needs and create
shareholder value,” said Terry J. Lundgren, chairman and chief executive
officer of Macy’s, Inc. “The cost efficiencies represent more than
two-thirds of our goal of annual SG&A expense reduction of $500 million,
net of growth initiatives, from previously planned levels by 2018. In
some cases, there will be short-term pain as we tighten our belt and
realign our resources. 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 to the marketplace.”

To address the need for greater efficiency and productivity, among the
changes being implemented by Macy’s, Inc. in early 2016 are:

  • Consolidating the grouping of existing Macy’s stores into five regions
    and 47 local districts (down from the current structure of seven
    regions and 58 local districts), as well as other field support
    functions. This reflects a smaller portfolio of stores and new
    technologies and techniques for managing the store business and
    tailoring assortments to local customer preferences.
  • Adjusting staffing levels at each Macy’s and Bloomingdale’s store in
    line with current sales volume to increase productivity and improve
    efficiency. An average of three to four positions will be affected in
    each of Macy’s and Bloomingdale’s approximately 770 going-forward
    stores (out of an average workforce of approximately 150 associates in
    each store), for a total of about 3,000 affected associates
    nationwide. Roughly 50 percent of affected store associates are
    expected to be placed in other positions.
  • Implementing a voluntary separation opportunity for about 165 senior
    executives in Macy’s and Bloomingdale’s central stores, office and
    support functions who meet certain age and service requirements and
    chose to leave the company beginning in spring 2016. Approximately 35
    percent of these executive positions will not be replaced.
  • Reducing an additional 600 positions in back-office organizations by
    eliminating tasks, simplifying processes and combining positions, with
    about 150 of these associates reassigned to other positions.
  • Consolidating the four existing Macy’s, Inc. credit and customer
    services center facilities into three. The call center in St. Louis
    will be closed in spring 2016, affecting approximately 750 employees.
    Work currently performed in St. Louis will be divided among existing
    credit and customer services centers in Tempe, AZ, Clearwater, FL, and
    Mason, OH, where a total of about 640 positions will be added.
  • Decreasing non-payroll budgets companywide in areas such as travel,
    meetings and consulting services.

Real Estate

The company continues to pursue the creation of shareholder value
through real estate initiatives originally announced on Nov. 11, 2015,
and provides the following updates:

  • Eastdil Secured, a leading real estate-focused investment bank, has
    been engaged by Macy’s, Inc. to approach potential interested parties,
    with assistance from Credit Suisse and Goldman Sachs, regarding
    forming partnerships or joint venture(s) for the company’s mall-based
    properties, as well as Macy’s flagship real estate assets in
    Manhattan, San Francisco, Chicago and Minneapolis. Eastdil joins a
    team of experienced advisors in banking, real estate, law and tax who
    are focused on monetizing real estate assets in a manner consistent
    with Macy’s overall strategy. Tishman Speyer has expressed interest in
    pursuing partnerships on the four flagship locations and, thus, will
    not be advising the company on those properties. Tishman Speyer will,
    however, continue to advise Macy’s on potential opportunities for
    maximizing the value of other real estate in the company’s portfolio.
  • The company has begun a search for a senior-level real estate
    executive to join the company to oversee and manage real estate
    activities, including the leadership of any partnerships or joint
    ventures.

Store Closings/Openings

The company today listed 40 Macy’s store closings (out of a current
total of about 770 Macy’s stores). Of the 40, 36 will be closed in early
spring 2016, consistent with its announcement in September 2015. The
other four stores were closed in the final three quarters of 2015, as
previously announced. (A list of planned store closings, as well as
openings, is included at the end of this news release.)

“Our company is committed to operating great Macy’s and Bloomingdale’s
stores in the best locations – both to serve shoppers who walk through
the door and to fulfill orders that are shipped directly to customers
around the country,” Lundgren said. “In today’s rapidly evolving retail
environment, it is essential that we maintain a portfolio of the right
stores in the right places. So we will continue to add stores
selectively while also being disciplined about closing stores that are
unproductive or no longer robust shopping destinations because of
changes in the local retail shopping landscape.”

The 36 Macy’s stores being closed in early 2016, along with four others
closed in the final three quarters of 2015, account for approximately
$375 million in annual sales, some of which are expected to be retained
in nearby stores and with online/mobile sales.

The company is committed to treating associates affected by store
closings with respect and openness. Associates displaced by store
closings may be offered positions in nearby stores where possible.
Eligible full-time and part-time associates who are laid off due to the
store closings will be offered severance benefits.

Financial Impact

The implementation of cost reductions is estimated to generate annual
SG&A savings of approximately $400 million, beginning in 2016. This will
help the company to achieve modest improvement in its EBITDA rate (as a
percent to sales) in 2016 compared with 2015 excluding gains from the
expected sale of real estate in Brooklyn – while still investing in
growth strategies, particularly in omnichannel capability at Macy’s and
Bloomingdale’s.

In conjunction with today’s announcements, as well as incremental asset
impairment charges related to store closings, approximately $200 million
of charges, of which approximately $165 million is expected to be cash,
are expected to be booked in the fourth quarter of 2015. These charges
were not previously included in earnings guidance provided by the
company and are in addition to the $111 million, or 20 cents per share,
booked in the third quarter as an estimate of asset impairment charges
related to 2016 store closings.

Macy’s, Inc., with corporate offices in Cincinnati and New York, is one
of the nation’s premier retailers, with fiscal 2014 sales of $28.015
billion. The company operates about 900 stores in 45 states, the
District of Columbia, Guam and Puerto Rico under the names of Macy’s,
Bloomingdale’s, Bloomingdale’s Outlet, Macy’s Backstage and Bluemercury,
as well as the macys.com, bloomingdales.com and bluemercury.com
websites. Bloomingdale’s in Dubai is operated by Al Tayer Group LLC
under a license agreement.

All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements are
based upon the current beliefs and expectations of Macy’s management and
are subject to significant risks and uncertainties. Actual results could
differ materially from those expressed in or implied by the
forward-looking statements contained in this release because of a
variety of factors, including conditions to, or changes in the timing
of, proposed store closings, store openings or other transactions,
changes in the conditions of the securities markets, particularly the
markets for debt securities and other factors identified in documents
filed by Macy’s with the Securities and Exchange Commission.

(NOTE: Additional information on Macy’s, Inc., including past news
releases, is available at www.macysinc.com/pressroom).

Macy’s Store Closings

Final clearance sales at the following Macy’s stores closing in early
2016 will begin on Monday, Jan. 11 and run for between eight to 12 weeks
(with the exception of Westfield Century City, North DeKalb Mall and
Roseburg Valley Mall, where final clearance sales are already in
progress):

  • Irvine Spectrum, Irvine, CA (140,000 square feet; opened in 2002; 112
    associates);
  • Country Club Plaza, Sacramento, CA (165,000 square feet; opened in
    1961; 111 associates);
  • Westfield Century City, Los Angeles, CA (136,000 square feet; opened
    in 1976; 108 associates). Note that this store will be closed in
    January 2016 and replaced with a new, larger store to open in this
    same shopping center in spring 2017;
  • Enfield Square main store, Enfield, CT (166,000 square feet; opened in
    1971; 84 associates);
  • Enfield Square furniture/home/men’s store, Enfield, CT (76,000 square
    feet; opened in 1971; 20 associates);
  • North DeKalb Mall, Decatur, GA (190,000 square feet; opened in 1965;
    89 associates);
  • Kailua, HI (59,000 square feet; opened in 1946; 57 associates);
  • Palouse Mall, Moscow, ID (41,000 square feet; opened in 1979; 47
    associates);
  • Northwoods Mall, Peoria, IL (165,000 square feet; opened in 1985; 62
    associates);
  • Cortana Mall, Baton Rouge, LA (243,000 square feet; opened in 1976;
    108 associates);
  • Valley Mall, Hagerstown, MD (120,000 square feet; opened in 1999; 59
    associates);
  • Berkshire Mall, Lanesborough, MA (111,000 square feet; opened in 1994;
    58 associates);
  • Eastfield Mall, Springfield, MA (127,000 square feet; opened in 1994;
    71 associates);
  • The Shoppes at Stadium, Columbia, MO (140,000 square feet; opened in
    2003; 81 associates);
  • Middlesex Mall, South Plainfield, NJ (81,000 square feet; opened in
    1976; 69 associates);
  • McKinley Mall main store, Buffalo, NY (88,000 square feet; opened in
    1989; 65 associates);
  • McKinley Mall home store, Buffalo, NY (31,000 Square feet; opened in
    1989; 10 associates);
  • Arnot Mall, Horsehead, NY (120,000 square feet; opened in 1995; 79
    associates);
  • Hudson Valley Mall, Kingston, NY (121,000 square feet; opened in 1995;
    72 associates);
  • Eastern Hills Mall, Williamsville, NY (127,000 square feet; opened in
    1971; 80 associates);
  • Cary Towne Center, Cary, NC (107,000 square feet; opened in 1991; 63
    associates);
  • Chapel Hill Mall, Akron, OH (169,000 square feet; opened in 1967; 91
    associates);
  • Midway Mall, Elyria, OH (105,000 square feet; opened in 1990; 64
    associates);
  • Quail Springs Mall, Oklahoma City, OK (146,000 square feet; opened in
    1986; 87 associates);
  • Pony Village Mall, North Bend, OR (41,000 square feet; opened in 1980;
    54 associates);
  • Roseburg Valley Mall, Roseburg, OR (40,000 square feet; opened in
    1980; 59 associates);
  • Suburban Square, Ardmore, PA (102,000 square feet; opened in 1930; 74
    associates);
  • Century III Mall, West Mifflin, PA (173,000 square feet; opened in
    1979; 101 associates);
  • Ridgmar Mall, Ft. Worth, TX (181,000 square feet; opened in 1998; 92
    associates);
  • Chesapeake Square, Chesapeake, VA (95,000 square feet; opened in 1999;
    69 associates);
  • Virginia Center Commons, Glen Allen, VA (110,000 square feet; opened
    in 1993; 81 associates);
  • Peninsula Town Center, Hampton, VA (173,000 square feet; opened in
    1977; 109 associates);
  • Military Circle Mall, Norfolk, VA (153,000 square feet; opened in
    1976; 95 associates);
  • Regency Square main store, Richmond, VA (100,000 square feet; opened
    in 1990; 100 associates);
  • Regency Square furniture/home/men’s store, Richmond, VA (124,000
    square feet; opened in 1990; 35 associates);
  • Downtown Spokane, Spokane, WA (374,000 square feet; opened in 1947; 94
    associates).

Macy’s stores closed in the final three quarters of 2015 (previously
announced):

  • Owings Mills Mall, Owings Mills, MD (164,000 square feet; opened in
    1986; 90 associates);
  • Bedford, NH (180,000 square feet; opened in 1966; 105 associates);
  • Essex Green Shopping Center, West Orange, NJ (93,000 square feet;
    opened in 1975; 101 associates). Note that this location was converted
    to a Macy’s Backstage store.
  • Downtown Pittsburgh, PA (1,158,000 square feet; opened in 1946; 170
    associates).

Store Openings

Five new Macy’s and Bloomingdale’s stores are currently planned and/or
under construction, as previously announced.

New Macy’s stores will be opening in:

  • Ka Makana Ali’i, Kapolei, HI (103,000 square feet; to open in fall
    2016; approximately 180 associates).
  • Westfield Century City, Los Angeles, CA (a 155,000 square-foot store
    to open in spring 2017 to replace an older and smaller Macy’s store in
    this very successful shopping center).
  • Fashion Place, Murray, UT (160,000 square feet; to open in spring
    2017; approximately 150 associates).

New Bloomingdale’s stores will be opening in:

  • Westfield Valley Fair Shopping Center, San Jose, CA (150,000 square
    feet; to open in fall 2017; approximately 250 associates).
  • The SoNo Collection, Norwalk, CT (150,000 square feet; to open in fall
    2018; approximately 200 associates).

In addition, in the next two years, the company plans to open about 50
additional Macy’s Backstage off-price locations (most of which will be
inside existing Macy’s stores), and about 40 freestanding Bluemercury
beauty specialty stores.

Internationally, new Macy’s and Bloomingdale’s stores are planned to
open in Al Maryah Central in Abu Dhabi, United Arab Emirates, in 2018
under license agreements with Al Tayer Group.

Contacts

Macy’s, Inc.
Media – Jim Sluzewski, 513-579-7764
or
Investor
– Matt Stautberg, 513-579-7780