People at the entrance of a Macy’s store in Jersey City, N.J.

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Macy’s will shut 125 stores over the next three years and slash about 2,000 corporate jobs, as it shutters its tech offices in San Francisco and its Cincinnati headquarters, the company announced Tuesday afternoon.

The department store chain said it plans to exit weaker shopping malls, and instead will shift its focus toward opening smaller-format stores in strip centers. Macy’s has shuttered more than 100 stores since 2015.

Beginning in 2020, it said it expects to generate annual gross savings of about $1.5 billion, which will be fully realized by the end of 2022. This year, Macy’s is anticipating gross savings of roughly $600 million, “some of which will flow to the bottom line in order to stabilize operating margin.”

Macy’s said it will reinvest some of these savings back into its business, with a focus on growing its off-price business, known as Backstage, expanding outside of the mall and improving online.

“We are taking the organization through significant structural change to lower costs, bring teams closer together and reduce duplicative work,” CEO Jeff Gennette said in a statement. “The changes we are making are deep and impact every area of the business, but they are necessary. I know we will come out of this transition stronger, more agile and better fit to compete in today’s retail environment.”

Macy’s shares were recently up less than 1%, after initially jumping more than 3% on the news.

The planned closures and job cuts come ahead of Macy’s holding a meeting with investors in New York on Wednesday, where it is expected to walk through a multi-year plan that aims to get the retailer back to sales growth.

Earlier Tuesday, Macy’s had confirmed with CNBC it was closing its tech offices in San Francisco, consolidating these operations in New York and Atlanta.

As it also shuts its headquarters in downtown Cincinnati, and an office in Lorain, Ohio, the company said New York will become its sole corporate headquarters.

Macy’s said the 125 stores now planned for closure, which include the roughly 30 it already announced, account for roughly $1.4 billion in annual sales.

Meantime, Macy’s said it is planning to open an additional 50 Backstage stores within its existing department stores, along with seven freestanding Backstage locations, in 2020.

The roughly 2,000 jobs being cut represent about 9% of its workforce, Macy’s said.

Macy’s said it expects the total costs related to these changes to amount to between $450 million and $490 million, the majority of which will be recorded in 2019.

‘A transition year’ 

Macy’s is calling 2020 a “transition year” and says it expects same-store sales to be negative, “due to the trajectory of the business over the past six months.”

Macy’s said Tuesday it expects revenues in fiscal 2020 to fall because of store closures. It is calling for net sales to be within a range of $23.6 billion to $23.9 billion, with same-store sales, on an owned plus licensed basis, dropping 1.5% to 2.5%. Analysts had been calling for net sales of $24.36 billion, according to a poll by Refinitiv.

While it hasn’t yet reported fourth-quarter and full-year earnings for 2019, Macy’s shared preliminary results ahead of its investor meeting.

Net sales for the fourth quarter, which includes the latest holiday season, are expected to be $8.3 billion, while net sales for fiscal 2019 are expected to be $24.5 billion, Macy’s said. It added it anticipates full-year earnings per share to be near the high end of a prior outlook.

Same-store sales, on an owned plus licensed basis, are expected to drop 0.5% during the fourth quarter, and drop 0.7% for fiscal 2019, Macy’s said.

Macy’s is set to report fourth-quarter and full-year sales and earnings on Feb. 25.

With a smaller base of stores, Macy’s set its three-year net sales goal to be within a range of $23.2 billion to $23.9 billion by fiscal 2022, while earnings per share, on an adjusted basis, are expected to be between $2.50 and $3.00. Same-store sales, on an owned plus licensed basis, are forecast to be down 1% to flat.

“We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams,” Gennette said. “Over the past three years, we have shown we can grow the top-line; however, we have significant work to do to improve the bottom-line.”

The company’s stock, which is valued at more than $5 billion, has fallen more than 35% over the past 12 months.

Read the full press release from Macy’s.

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