Iconic American department store chain Macy's will shutter 125 stores and slash 2,000 jobs over the next three years as part of a plan to shore up its financial position, the company announced Tuesday.

Like other retailers, Macy's has struggled with the decline of the once-dominant American shopping mall, as well as competition from online behemoth Amazon.

The department store said it expects the "Polaris" strategy to generate annual gross savings of approximately $1.5 billion once it is fully implemented by the end of 2022, with savings of approximately $600 million this year.

"We are confident in our Polaris strategy, and we have the resources required to return Macy's, Inc. to sustainable, profitable growth," Macy's CEO and chairman Jeff Gennette said in a statement.

"We will focus our resources on the healthy parts of our business, directly address the unhealthy parts of the business and explore new revenue streams."

Macy's Thanksgiving Day Parade in New York
Macy's Thanksgiving Day parade. AFP / TIMOTHY A. CLARY

The company will close approximately 125 of its "least productive" stores over the next three years, which account for $1.4 billion in annual sales. This includes 30 stores already in the process of closure, the statement said.

In addition, the New York office will become the company's sole corporate headquarters, and the chain will close its San Francisco and Cincinnati offices.

The plan calls for "streamlining its organization with a net reduction in its corporate and support function headcount of 9 percent, or approximately 2,000 positions," the company said.

The savings generated by the program will be invested in improving the digital business and "off-mall expansion," and new, smaller store formats, among other things.

The cost of the restructuring is expected to total approximately $450 million to $490 million, the majority of which will be recorded in 2019, the statement said.