Macy’s to Thin Top Management Ranks as Sales Growth Remains Modest

Macy’s (M) doesn’t expect sales growth this year to be much better than it was during the recent holiday season and is going to simplify its management structure to become nimbler and help rein in costs.

The department store said the reorganization would include the elimination of 100 jobs in senior vice president-level or higher levels as part of Macy’s goal to generate $100 million in annual cost savings.

“The steps we are announcing to further streamline our management structure will allow us to move faster, reduce costs and be more responsive to changing customer expectations,” Macy’s CEO Jeff Gennette said in a statement.

Last year, Macy’s reported disappointing holiday season sales for November and January, but with the full quarter report released on Tuesday, it became clear, business remained a challenge in January. For the full quarter, revenue fell to $8.46 billion from $8.67 billion from the four quarter a year earlier, though it beat the $8.45 billion analysts were expecting. Comparable sales include sales in departments Macy’s licenses rose 0.7%, below analysts expectations for growth of 0.9%. On the positive side, Macy’s online sales grew a double-digit percentage.

Looking ahead, 2019 doesn’t look to be a bonanza either: Macy’s is forecasts for comparable sales, on an owned plus licensed basis, to be unchanged to up 1%.

While Macy’s has made enormous strides in the last two years to return to growth, it is contending with headwinds such as declining traffic at the malls it occupies—a problem exacerbated by the struggles of peers J.C. Penney and Sears, which are closing stores or drawing fewer shoppers at malls where they remain—and the growth of new rivals, Amazon to Ulta Beauty.

Under Gennette, Macy’s has made progress taming corporate and consumer addictions to discounting and promotions and improving its stores. Yet despite efforts to hold less inventory in stores and improve its overall inventory management, gross profit margins on merchandise fell more than one percentage point to 37.5% of sales.

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