Macy’s will reduce its corporate and management headcount by approximately 3,900 people as part of a cost restructuring expected to save approximately $365 million in fiscal 2020 and $630 million on an annualized basis. Pre-tax costs of the restructuring, estimated at $180 million in cash, will be recorded during the company’s fiscal Q2.
“COVID-19 has significantly impacted our business,” said Jeff Gennette, Chairman and CEO of Macy’s in a statement. “While the reopening of our stores is going well, we do anticipate a gradual recovery of business, and we are taking action to align our cost base with our anticipated lower sales.”
Macy’s closed all its stores on March 18, 2020 and began gradual reopenings in early May. Like many “non-essential” retailers, Macy’s furloughed a majority of its employees as the pandemic froze large segments of the U.S. economy. The retailer expects that most of its furloughed employees will return to work beginning July 5.
The coronavirus’ impact has forced several department store retailers into Chapter 11 bankruptcy and even liquidation in 2020, including JCPenney, Neiman Marcus and Lord & Taylor. However, Macy’s appears to have avoided the harshest effects of the economic slowdown. More will be learned when the retailer reveals its Q1 earnings on July 1.
“We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward,” said Gennette. “Our lower cost base combined with the approximately $4.5 billion in new financing will also make us a more stable, flexible company.”