A spokeswoman for the department store giant said this is part of a strategy to "right-size its store fleet."
Employees can transfer to another store or get severance pay.
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The State Street and suburban locations are staying open, the spokeswoman said.
Macy's has been in the Magnificent Mile location for 45 years.
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A clearance sale will begin this month and run for about eight to 12 weeks.
The decision to close the location was part of Macy's strategy announced in February 2020, prior to the COVID-19 pandemic and civil unrest in Chicago, the spokeswoman said.
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Read Macy's full statement:
"After careful consideration, Macy's has decided to close our Water Tower Place location. This closure is part of the company's strategy to right-size its store fleet, announced in early 2020.
The decision to close a store is always a difficult one, and Macy's Water Tower Place has been honored to serve its customers on the Magnificent Mile for 45 years.
"Macy's previously shared this information with our valued colleagues. Regular, non-seasonal colleagues who we are unable to place at a nearby Macy's store will be eligible for severance, including outplacement resources.
"A clearance sale will begin in January 2021 and run for approximately 8 - 12 weeks.
Macy's is committed to the greater Chicago community. We will continue to serve our customers at Macy's on State Street as well as in a number of suburban locations such as Old Orchard, Oakbrook, Woodfield, Orland Park and Hawthorn Court or online at macys.com and the Macy's app."