Shares of Macy's, Inc.’s (M - Analyst Report) fell 3.2% in yesterday’s after market trading session following the company’s announcement of extensive restructuring, including store closures and layoffs. The announcement overshadowed Macy’s decent holiday comps report.

Analysts note that though the restructuring measures are impressive and will result in $140 million in annual cost savings beginning 2015, the $100—$110 million cost incurred to implement the same might prove a drag.

The need to be in sync with the changing trends and boost sales has compelled Macy’s to adopt restructuring. The company will merge the merchandising and marketing operations of both its stores and online portal into one single entity. The same will also be applicable to its Bloomingdale's brand.

Moreover, at local district level, Macy’s will put an end to district planner positions and build new regional teams to better understand needs merchandise localization. The changes are likely to put at risk 265 positions at central offices of Macy’s and Bloomingdale's and at local markets across the U.S. The company is looking to absorb some of this workforce in its other divisions.

Also, the company will be closing 14 Macy’s stores by spring 2015. These 14 stores generate annual revenues of $130 million on an average. Moreover, it expects to layoff 2,200 employees at various store levels following rationalization of store and field operations.

The company plans to divert the savings from these restructuring activities to further develop its omni-channel capacities, build superior security infrastructure and enhance direct-to-consumer fulfillment capacity in all full-line Macy’s and Bloomingdale’s stores and at the five fulfillment centers situated at Tennessee, Arizona, California, Connecticut and West Virginia.

Moreover, the company plans to open  a 150,000 sq. feet Bloomingdale's outlet in San Jose, CA and an 155,000 sq. feet Macy’s store in Los Angeles, CA along with 7 other Macy’s and Bloomingdale’s stores across the country, including Ponce, PR, Kapolei, HI, Miami, FL, and Honolulu, HI.

Concurrently, in a separate press release, Macy’s reported comparable sales on an owned plus licensed basis grew 2.7% for the months of November and December 2014. Further, on an owned basis, comps were up 2.1% for the same period. The company’s various initiatives like My Macy’s localization, omni-channel integration and Magic Selling customer engagement helped it to deliver good sales numbers over the holiday season after a mediocre third-quarter fiscal 2014.

The holiday season this year got a boost from falling oil prices that led to a last minute spurt in sales helping retailers to end it on a high note. Apart from Macy’s, J. C. Penney Company, Inc. (JCP - Analyst Report) too reported an increase of 3.7% in its comps for the combined nine weeks of November and December 2014. Other retailers like Urban Outfitters Inc. (URBN - Analyst Report) posted a 4% rise in comps for two months ended Dec 31, 2014 while Pacific Sunwear of California Inc. (PSUN - Snapshot Report) reported 9% growth in comps for December.

Buoyed by positive comps data, the company revised its fourth-quarter fiscal 2014 outlook. Comps, on an owned plus licensed basis, are now expected to be in the range of 2.5%-3% as against 2%-3%. Further, comps, on an owned basis, are expected to be in the range of 1.9%-2.4% as against 1.8%-2.8%.

For full-year 2014, comps, on an owned plus licensed basis, are projected to be in the range of 1.4%-1.5% as against earlier guided range of 1.2%-1.5%. However, the company reiterated its full-year earnings guidance range of $4.25 to $4.35 per share.

Currently, Macy’s carries a Zacks Rank #4 (Sell).