Macy's Inc. will cut about 3,900 corporate and management jobs to slash costs in an effort to weather the long-term effects of the COVID-19 pandemic on the reeling retail sector.
The restructuring, announced Thursday, is expected to save the company $365 million (Dh1.3 billion) this fiscal year, then about $630 million a year going forward, it said in a statement.
"We know that we will be a smaller company for the foreseeable future, and our cost base will continue to reflect that moving forward," Chief Executive Officer Jeff Gennette said.
The job cuts are in addition to the staff reductions taking place inside stores, along the Macy's supply chain and in customer support roles. The new round of layoffs adds to fears that many of the measures taken to temporarily furlough employees in the early stages of the pandemic are becoming permanent. The company had 123,000 workers at the end of last year, according to a filing.
The layoff news comes just two weeks after the department-store chain heartened investors by announcing it had reopened 450 stores in some capacity and expected to exit the second quarter with a "clean inventory position." Gennette said at the time reopened stores are performing better than anticipated, initially sending shares soaring.
But share prices have sunk 24 per cent since then, as customers in some markets continue to avoid large indoor retail spaces in favor of online ordering, local businesses or - to the fear of many retailers - not spending money on non-essentials at all. The U.S. savings rate hit an all-time high of 33 per cent in April thanks mostly to COVID-19-induced business closures, and some of that frugality seems to be persisting.
The company will take a pre-tax cash charge of about $180 million related to the restructuring, mostly in the second quarter.
Macy's fell 2.7 per cent to $6.60 in early trading. The stock is down 60 per cent this year, compared with a 5.6 per cent decline in the S&P 500 Index.