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Macy's Laying Off 800 San Francisco Tech Workers, Moving Operations To Atlanta, NYC

Macy’s is laying off hundreds of workers at its San Francisco technology division, consolidating its tech operations in Atlanta and New York City.

A Macy's mall-based department store location.

The move is part of a larger corporate restructuring that is expected to be announced by the retailer during its annual investor conference in New York Wednesday.

In a letter to California’s Employment Development Department Monday obtained by Bisnow, Macy’s Vice President of Human Resources Shamika Lackey informed the agency that it intended to lay off 831 technology division workers between April and August of this year, including 24 software engineering managers, 74 software engineers, 91 senior software engineers and 45 software technical leads.

Macy's San Francisco operations have been based in 680 Folsom St., a 469K SF tower in San Francisco’s South of Market District owned by Boston Properties.

While the layoffs are bad news for San Francisco, the decision appears to be good news for the Metro Atlanta market. Macy’s is leasing 105K SF at a newly constructed, timber-framed office building known as HinesT3 West Midtown project. Macy’s told San Francisco employees they would be able to apply to open jobs in Atlanta and New York.

Macy’s lease has been known in Georgia economic development circles as Project Northstar. It is unknown exactly how many new employees Macy’s will hire in Atlanta, where it already operates a technology office in the affluent northern suburb of Johns Creek. Given that many urban offices today average about 200 to 250 SF per employee, Macy's new tech hub could employ in excess of 400 workers.

A source familiar with the deal told Bisnow that the Johns Creek office won't be affected by the 105K SF deal.

"After careful consideration, Macy's offices in San Francisco will close. The functional operations that currently sit in the 680 Folsom location, including Macy's Product and Digital Revenue, .com and Macy's Technology will move into our locations in New York City and Atlanta," a Macy's spokesperson told Business Insider Tuesday

Views of the Atlanta skyline from a future floor at T3 West Midtown.

Like many department stores, Macy's has struggled against changing consumer preferences and shopping habits, especially as online sales continue to grow. Sales at department stores in 2019 sank 5.5% to $135B, according to the U.S. Census Bureau, and Macy's officials recently announced plans to shutter 30 stores this year.

Online retail sales are expected to reach $645B in 2020, a 12% increase from last year, according to FTI Consulting's 2019 online retail sales forecast. Online sales are expected to account for 21% of all retail sales in the U.S. by 2025.

In recent years, though, Macy's has focused on its technology and omnichannel operations to help fuel sales.

“Mobile remains the company's fastest-growing channel, with downloads and mobile active users experiencing significant growth during 2019,” Macy's officials said in the company's third-quarter earnings report.

The retailer also is using technology to help reduce annual costs by as much as $550M in the next four years, The Motley Fool reported. Some of the initiatives include self-checkout stations in the store and collecting merchandise in-store to fulfill online orders. Macy's also is expected to roll out a new stand-alone retail store concept in Texas focused on health and beauty, Chain Store Age reported.

UPDATE, FEB. 4, 1:30 P.M. ETThis story has been updated with new information on Macy's plans to lay off workers in San Francisco and transfer some tech jobs to Atlanta and New York.