Annual report pursuant to Section 13 and 15(d)

Restructuring, Impairment, Store Closing and Other Costs

v3.21.1
Restructuring, Impairment, Store Closing and Other Costs
12 Months Ended
Jan. 30, 2021
Restructuring Costs And Asset Impairment Charges [Abstract]  
Restructuring, Impairment, Store Closing and Other Costs

 

4.

Restructuring, Impairment, Store Closing and Other Costs

Restructuring, impairment, store closing and other costs (income) consist of the following:

 

 

 

2020

 

 

2019

 

 

2018

 

 

 

 

 

 

 

(millions)

 

 

 

 

 

Asset Impairments

 

$

3,280

 

 

$

197

 

 

$

64

 

Restructuring

 

 

224

 

 

 

123

 

 

 

80

 

Other

 

 

75

 

 

 

34

 

 

 

(8

)

 

 

$

3,579

 

 

$

354

 

 

$

136

 

 

During 2020, primarily as a result of the COVID-19 pandemic, the Company incurred non-cash impairment charges totaling $3,280 million, the majority of which was recognized during the first quarter of 2020 and consisted of:

 

 

$3,080 million of goodwill impairments, with $2,982 million attributable to the Macy’s reporting unit and $98 million attributable to the bluemercury reporting unit. See discussion at Note 6, “Goodwill and Other Intangible Assets.”

 

 

$200 million of impairments primarily related to long-lived tangible and right of use assets to adjust the carrying value of certain store locations to their estimated fair value.

 

As disclosed in Note 2 “Impact of COVID-19”, the Company announced a restructuring plan in the second quarter

of 2020 that resulted in the recognition $154 million of expense for severance. Substantially all of this severance was paid as of January 30, 2021.

 

 On February 4, 2020, the Company announced its Polaris strategy, a multi-year plan designed to stabilize profitability and position the Company for sustainable, profitable growth. The strategy, developed in 2019 and refined in 2020, includes initiatives focused on growing the Company’s digital channels, expanding the Company’s off-mall store presence and modernizing the Company’s technology and supply chain infrastructures. In conjunction with these initiatives, the Company announced plans to close approximately 125 of its least productive stores over the next three years, including 37 store closures that were announced in 2020 and 30 store closures that were announced in 2019. As part of the reset of its cost base, the Company developed a plan to streamline the organization through reductions in corporate and support functions, campus consolidations and the consolidation of the Company's sole headquarters to New York, New York.    

A summary of the restructuring and other cash activity for 2020 and 2019 related to the Polaris strategy, which are included within accounts payable and accrued liabilities, is as follows:

 

 

 

 

 

 

 

Professional

 

 

 

 

 

 

 

 

 

 

 

fees and

 

 

 

 

 

 

 

Severance and

 

 

other related

 

 

 

 

 

 

 

other benefits

 

 

charges

 

 

Total

 

 

 

 

 

 

 

(millions)

 

 

 

 

 

Balance at February 2, 2019

 

$

 

 

$

 

 

$

 

Additions charged to expense

 

 

121

 

 

 

36

 

 

 

157

 

Cash payments

 

 

(6

)

 

 

(27

)

 

 

(33

)

Balance at February 1, 2020

 

 

115

 

 

 

9

 

 

 

124

 

Additions charged to expense

 

 

55

 

 

 

17

 

 

 

72

 

Cash payments

 

 

(156

)

 

 

(24

)

 

 

(180

)

Balance at January 30, 2021

 

$

14

 

 

$

2

 

 

$

16

 

 

The Company may incur significant additional charges in future periods as it continues the execution of its Polaris strategy initiatives. Since the scope of such efforts are not fully known at this time, the benefits of such initiatives, and any related charges or capital expenditures, are not currently quantifiable. Actions associated with the Polaris strategy are currently expected to continue through 2022.

During 2018, the Company closed or announced the closure of ten Macy's stores. In addition, the Company introduced a plan in 2018 that reduced the complexity of the upper management structure to increase the speed of decision making, reduce costs and respond to changing customer expectations. Restructuring, impairment, store closing and other costs for 2018 included costs and expenses, including severance and other human-resource related costs, primarily associated with the organizational changes and store closings announced in January 2019. For 2018, the Company recorded expense of approximately $80 million of severance and other human resource-related costs associated with these restructuring activities.

The Company expects to pay out the majority of the 2020 accrued severance costs, which are included in accounts payable and accrued liabilities on the Consolidated Balance Sheets, prior to the end of the second quarter of 2021. The 2019 and 2018 accrued severance costs, which were included in accounts payable and accrued liabilities on the respective Consolidated Balance Sheets, were paid out in the year subsequent to incurring such severance costs.