Macy's to close 150 stores, open new Bloomingdale's and Bluemercury

As Macy's In its quest to increase sales, the department store operator announced Tuesday that it will close about 150 of its namesake stores and open more establishments with better locations or that sell luxury items.

The changes reflect a focus on what works at Macy's (the Bloomingdale's department store and the Bluemercury beauty chain) and what doesn't. its namesake stores, particularly those in struggling shopping centers. In its holiday quarter results released Tuesday, the retailer said its Macy's department stores performed worse than Bloomingdale's and Bluemercury.

In reporting its earnings, Macy's shared its strategy for the future. The change in strategy comes weeks after Tony Spring, former CEO of Bloomingdale's, started as CEO of Macy's on February 4.

Macy's had already announced in January that it would close five stores of the same name and lay off more than 2,300 people.

In an interview with CNBC on Tuesday, Spring said the company is restructuring its store presence after taking a hard look at which stores are in the right locations and which are not.

“We have some stores that are just underproductive or not that profitable, and we have to address that,” he said. “On the contrary, we have stores that are highly productive and highly profitable. We have markets, stores and centers that we are not in today and that we would like to be in.”

Here's a closer look at ads from major Macy's stores, broken down by store brand.

Sales at Macy's namesake stores have lagged the most, and that business will see the biggest changes.

The company plans to close about 150 stores, including 50 that will close by early 2025. It has not disclosed those locations, but said they are “unproductive.”

One of the stores Macy's plans to close is its massive 400,000-square-foot flagship store in the heart of San Francisco's main shopping district, Union Square, Marisa Rodriguez, CEO of the Union Square Alliance business group, told CNBC in a statement. However, Rodriguez noted that Macy's does not plan to close the store until it finds a buyer for the property, a process that may not happen quickly.

The stores it had already said would close are located in Arlington, Virginia; San Leandro, California; Lihue, Hawaii; Simi Valley, California and Tallahassee, Florida. The stores will close in early 2024.

Separately, Macy's said it will boost investments in the roughly 350 namesake locations that will remain open.

For example, Spring said in an interview with CNBC that the company is testing how it can improve customer service at 50 of its stores. In the most recent quarter, she added or moved employees into different roles at those locations, such as offering more support in the fitting room and footwear department.

The company is also moving forward with its strategy of opening smaller Macy's stores in suburban shopping centers. Last year, it announced it would open up to 30 stores over the next two years. The locations are about one-fifth the size of traditional mall stores.

Spring told investors on an earnings conference call that there is a stark difference between the Macy's stores the company is closing and those that will remain open. The 150 stores that will close represent 25% of Macy's square footage, but less than 10% of its sales, he said.

“They are subproductive and we have to focus on making sure we have the best stores, not the most stores,” he said on the earnings conference call.

In addition to considering the economics, he said a Macy's team spent about six or seven months evaluating stores based on other factors, including customer demographics, digital demand and the condition of the store or mall.

As of February 4, Macy's had about 500 stores of the same name. Most are typical mall locations, but that total also includes some of its smaller stores and standalone locations of Macy's discount brand, Backstage.

Bloomingdale's, which has surpassed Macy's namesake stores, will soon have more stores.

The retailer plans to open about 15 new Bloomingdale's stores over the next three years. It hasn't announced specific locations, but said some will be in new markets.

Higher-end department stores skew toward higher-income shoppers and fashionistas, and sell many popular luxury brands.

Like its sister brand Macy's, Bloomingdale's has been testing a smaller store concept, called Bloomie's.

At the end of the most recent fiscal year, Bloomingdale's had 33 locations. There are also three Bloomie's stores and 21 outlets.

Bluemercury has been the brightest point in the retailer's performance: it was the only brand of the three to post comparable sales growth in the fourth quarter.

The beauty chain will also grow in the coming years. Parent company Macy's said it will open at least 30 new Bluemercury stores over the next three years, some in new markets. It will also remodel about 30 existing stores during that time.

Bluemercury has been testing a new store prototype, which includes more spa services. The concept was implemented in two locations: New Canaan, Connecticut and Bronxville, New York.

Macy's acquired Bluemercury for $210 million in 2015. As of February 4, the beauty chain has 159 locations.

—CNBC's Gabrielle Fonrouge contributed to this report.