Buried inside an enormous press release Wednesday detailing a fresh round of store closures, Macy's said it will open 50 Backstage off-price stores and 50 Bluemercury beauty stores over the next two years. The foray into the off-price channel long dominated by TJX Companies (TJX - Get Report) and Ross Stores (ROST - Get Report) via the Backstage concept has been a particular focus of Macy's of late.
The company launched the Backstage off-price concept last fall via six free-standing stores. The store's merchandise, which includes home decor, shoes, sunglasses, baby gear, bedding and packaged snacks, is purchased by a separate "off-price organization," according to Macy's. More recently, the company shifted its focus to opening the Backstage concept inside full-price Macy's stores.
The company will close 68 stores by early spring in an effort to save money as it battles the transition to digital shopping. The company expects its sales this year to be hurt by $575 million as a result of the closures. About 3,900 employees will be let go.
Macy's reiterated that it expects to close 100 stores over the next few years.
"As we've noted, it is essential that we maintain a healthy portfolio of the right stores in the right places," Macy's outgoing Chairman and CEO Terry Lundgren said in a statement. "We are closing locations that are unproductive or are no longer robust shopping destinations due to changes in the local retail shopping landscape, as well as monetizing locations with highly valued real estate."
Although the closures will dent Macy's top line, it will boost its bottom line.
Coupled with a reorganization of its organizational structure, Macy's anticipates saving $550 million in expenses this year.
Shares of Macy's plunged as much as 9% in afterhours trading to $32.64 as the company also detailed a lackluster holiday season of profits.