In another effort to shrink its footprint and pivot to a small-store format, Macy's plans to close several department stores and reduce its overall workforce by 3.5%.

The retail chain announced it will close five stores in California, Florida, Hawaii and Virginia and lay off 2,350 employees, including 13% of its corporate workforce, The Wall Street Journal first reported. The stores are set to close early this year, and Macy's plans to open smaller format stores in outdoor shopping centers.

"As we prepare to deploy a new strategy to meet the needs of an everchanging consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company," a Macy’s spokesperson said in a statement to Bisnow.

The layoffs are set to occur Jan. 26, WSJ reported. The five stores are located in Arlington, Virginia; San Leandro, California; Simi Valley, California; Lihue, Hawaii; and Tallahassee, Florida. Macy's also plans to close two furniture stores to relocate them.

The closures and layoffs come after Macy's has faced pressure to improve performance. In December, an investor group made up of Arkhouse Management and Brigade Capital Management submitted a proposal offering to buy the chain's outstanding stock not owned by the company for $5.8B.

The announcement aligns with Macy's ongoing efforts to push the smaller store format. These stores are roughly one-fifth the size of its department stores, which average 180K SF to 200K SF, WWD reported. The smaller stores are known as Market by Macy's and Bloomie's and average 30K SF to 40K SF.

The company has 13 smaller stores open, according to its website, with plans to triple its footprint in upcoming months. Macy's boasts 489 department stores, furniture and fulfillment center locations as of its 2023 third quarter earnings release.

The closures of department stores across the country have allowed many mall owners to pursue redevelopments that add a mix of uses to the properties. One of the latest Macy's closures is already teed up for that strategy: the Arlington, Virginia, location at the Ballston Mall, which was approved by the county for a 555-unit redevelopment in December 2022, ARLnow reported.