Macy's, Inc. M announced restructuring updates, including cost-containment measures and headcount reductions to address challenges related to the pandemic and position itself for future success. The beleaguered retailer said that it will eliminate nearly 3,900 corporate and management jobs, also having minimized staffing at its stores, supply chain and customer-support network.
These actions will result in cost savings of roughly $365 million in fiscal 2020 and about $630 million annually. The aforementioned savings will be in addition to $1.5-billion cost savings annually, which is anticipated to be accomplished by 2022 end.
However, the restructuring actions will take pre-tax cash charge of about $180 million in fiscal 2020, mostly in the fiscal second quarter. The COVID-19 pandemic has largely hurt the company’s business. Jeff Gennette, chairman and CEO, said "COVID-19 has significantly impacted our business. While the re-opening 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."
We note that this Zacks Rank #3 (Hold) stock declined 4.1% during trading session on Jun 25. A glance at the company’s price performance shows that it has lost 69.8% in a year, wider than its industry’s 63.3% plunge.
Earlier this month, Macy’s released preliminary numbers for first-quarter fiscal 2020. The departmental store retailer’s net sales amounted to $3,017 million in the fiscal first quarter, showcasing a decline of 45.2% on a year-over-year basis. Further, adjusted loss for the quarter came in at $2.03 per share. The company had posted adjusted earnings of 44 cents per share in the year-ago quarter. Management stated that COVID-19-induced temporary store closures had significant negative impact on the top and bottom lines during this period.
The New York-based company reported operating loss of $969 million against operating income of $203 million in the year-ago period. In the fiscal first quarter, Macy’s reported adjusted EBITDA loss of $689 million. The company had reported adjusted EBITDA of $447 million in the year-ago quarter.
Nevertheless, as coronavirus-led restrictions are gradually being lifted, Macy’s is on track to reopen stores. Management stated that the reopened stores have been performing above expectations. Also, Macy’s curbside pickup services have been receiving positive response from customers. Apart from this, management informed that it witnessed a steady uptick in the digital business for May. Management is optimistic about demand for seasonal merchandise and expects to end second-quarter with a clean inventory. Macy’s also stated that it will turn into a smaller company going forward. Its lower cost base, coupled with about $4.5-billion new financing, will help it become more stable and flexible.
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