Macy’s, Inc. Outlines Moves to Drive Profitable Growth and Enhance Shareholder Value

CINCINNATI–(BUSINESS WIRE)–Macy’s, Inc. (NYSE:M) today outlined a series of initiatives to drive
profitable growth, enhance shareholder value and strengthen Macy’s as
America’s preferred omnichannel shopping destination. The company will
heighten the Macy’s brand with exclusive products and an improved
shopping experience. Plans also include re-creating Macy’s physical
store presence as customer shopping preferences and patterns evolve,
reallocating investments to highest-growth-potential store and digital
businesses, and capitalizing on opportunities within the company’s real
estate assets.

(Editor’s Note: Macy’s, Inc. this morning also issued a separate news
release announcing second quarter 2016 sales and earnings and
reaffirming full-year 2016 guidance.)

“We operate in a fast-changing world, and our company is moving forward
decisively to build further on Macy’s heritage as a preferred shopping
destination for fashion, quality, value and convenience. This involves
doing things differently and making tough decisions as we position
ourselves to serve customers who have high expectations of their
favorite stores, online sites and apps,” said Terry J. Lundgren, Macy’s,
Inc. chairman and chief executive officer.

“The announcements we are making today represent an advancement in our
thinking on the role of stores, the quality of the shopping experience
we will deliver, and how and where we reinvest in our business for
growth. In the short term, our company’s topline sales will be somewhat
smaller, but the changes being made will position us to grow comparable
sales more quickly and generate a level of profitability that stands out
among retailers,” said Jeff Gennette, Macy’s, Inc. president, who is
designated to succeed Lundgren as chief executive officer in the first
quarter of 2017. “We will continue to carefully analyze consumer
shopping patterns and trends, and use data and customer insights as the
basis for innovations to drive the business. You can look forward to a
company that expedites decision-making, moves faster, and is bolder in
its approach to the customer.”

Re-creating the Macy’s Store Portfolio

Macy’s is re-creating its physical store footprint to capitalize on
Macy’s unique competitive advantage of operating in the most attractive
retailing locations in America. While still maintaining a significant
bricks-and-mortar presence in 49 of the top 50 U.S. markets, Macy’s will
operate fewer stores and concentrate its financial resources and talent
on our better-performing locations to elevate their status as preferred
shopping destinations. Stores will remain critical customer touchpoints
for Macy’s, along with online shopping and mobile apps, as omnichannel
retailing continues to evolve.

As part of this strategy, the company intends to close approximately 100
Macy’s full-line stores (out of a current portfolio of 728 Macy’s
stores, including 675 full-line locations). Most of these stores will
close early in 2017, with the balance closing as leases and certain
operating covenants expire or are amended or waived. In a number of
cases, stores will be closed as the value of the real estate exceeds
their value to Macy’s as a retail store. The locations of the 100 stores
to be closed will be announced at a later date, once the company makes
final decisions. The company will act to remain connected to customers
of the stores it will be closing by supplementing merchandise
assortments in surrounding locations, as well as through the company’s
online site and mobile app.

“Customers nearly everywhere in America will have easy access to Macy’s
stores, with the additional convenience and increased functionality of
our dynamic digital offering,” Gennette said.

“Nearly all of the stores to be closed are cash flow positive today, but
their volume and profitability in most cases have been declining
steadily in recent years. We recognize that these locations do not yield
an adequate return on investment and often do not represent a customer
shopping experience that reflects our aspirations for the Macy’s brand.
We decided to close a larger number of stores proactively so we can
invest in a winning customer experience in our most productive and
highest-potential locations, as well as invest in growth sooner and more
aggressively in digital and mobile,” Gennette said.

“We believe that this reduction of 100 locations in the short term will
result in a more appropriate store portfolio for Macy’s in the longer
term and help us to accelerate our progress in building a vibrant
omnichannel brand experience. With this strategy, we will be able to
reinvest in a more energized shopping experience in our remaining stores
and elevate our total customer experience across all methods of
shopping,” he added.

Together, annual sales volume of the approximately 100 closed locations,
net of sales expected to be retained in nearby stores and online, is
expected to be roughly $1 billion. The reduction in EBITDA is expected
to be offset by expense savings beyond those associated with store
closings.

The company will communicate its store closing decisions directly with
the associates in those locations prior to a public announcement. Macy’s
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 closing will
be offered severance benefits.

Improving the Store and Online Shopping
Experience

Macy’s will invest in improvements in ongoing stores and digital
vehicles. These investments will take a range of forms.

In stores, Macy’s will be adding new vendor shops, bringing new
businesses onto the sales floors through additional license agreements,
increasing the size and quality of staffing through programs such as My
Stylist personal shopping services, infusing new technology,
accentuating high-potential businesses such as fine jewelry, and
creating new in-store events and experiences.

Macy’s, Bloomingdale’s and Bluemercury also are reinvesting to maintain
exceptional growth in digital sales – transactions generated from
websites and apps. The company’s online business has grown at a
compounded double-digit rate in each of the past 15 years, placing
Macy’s, Inc. sixth on an independently published list of America’s
largest-volume online retailers.

To foster continuation of this growth, the company is investing in
capacity-building on its sites and apps, improvement in natural language
search, faster page loading and simpler procedures for placing and
fulfilling orders. Macy’s and Bloomingdale’s successful Buy Online
Pickup in Store offering, introduced in 2013, is being refined to
improve speed and convenience of the customer experience.

Moving Forward on Real Estate

The company continues to pursue opportunities to generate value from its
real estate portfolio, consistent with our commitment to stores as a
critical element of our long-term omnichannel strategy and balance sheet
leverage objectives.

The company has been examining opportunities for four of Macy’s large
downtown flagship stores in various cities. We are in negotiations to
sell the Macy’s Men’s Store on Union Square in San Francisco for
redevelopment. Details of that transaction will be made available if and
when a deal is finalized. If a transaction is finalized, the Union
Square Men’s Store likely will be closed after a comprehensive and
compelling men’s shopping experience is built within the main Union
Square store, which is located across the street. In that scenario, the
Men’s Store will remain open until the new shopping environment in the
main store is completed.

In addition to the flagship stores, the company continues to work on
plans for optimizing its real estate portfolio in the context of our
overall strategy, and it intends to continue to capitalize on situations
where the development or redevelopment of all or a portion of a real
estate holding exceeds the value of its existing use. This will occur
through sales of assets or portions thereof (some of which are included
in the 100 stores to be closed) and exploration of possible joint
ventures or strategic alliances with development partners. We are in
early-stage joint venture/strategic alliance discussions with various
potential partners.

Financial Impact

Non-cash asset impairment and other charges of $249 million being booked
in the second quarter include a preliminary estimate of upcoming store
closings in fiscal 2016 and beyond. As individual store decisions are
made and asset sales completed, we will update the amount to reflect the
expected impact on financial results in 2017 and beyond.

Macy’s, Inc. today operates 728 Macy’s stores. Over the past six years
(2010 through 2016 to date), approximately 90 Macy’s stores have been
closed and 13 new Macy’s stores have been opened. In addition, six new
Macy’s Backstage offprice locations opened in fall 2015.

Macy’s, Inc., with corporate offices in Cincinnati and New York, is one
of the nation’s premier retailers, with fiscal 2015 sales of $27.079
billion. The company operates about 880 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 transactions, prevailing interest rates and non-recurring
charges, store closings, competitive pressures from specialty stores,
general merchandise stores, off-price and discount stores,
manufacturers’ outlets, the Internet, mail-order catalogs and television
shopping and general consumer spending levels, including the impact of
the availability and level of consumer debt, the effect of weather and
other factors identified in documents filed by the company with the
Securities and Exchange Commission.

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

Contacts

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