Macy's regroups, will cut jobs

BY JOHN ECKBERG JECKBERG@ENQUIRER.COM

Rocked by weak holiday sales and facing a critical spring 2008 fashion season, Macy's Inc. on Wednesday moved to turn around its slumping share price by announcing layoffs of up to 2,300 employees, eliminating three divisions and creating a new district management structure.

"When you have to come out and be at a division that is no longer going to exist, it's never easy," said Terry J. Lundgren, chief executive of the Cincinnati-based retail giant and architect of the new initiative. "I really dislike this part of the job. But it's the reality of the business. If it was just a consolidation, well, I'd say we've done that and been there. This is something quite different."

None of the job losses will hit Cincinnati, Macy's promised, although other areas of the nation won't be so lucky.

Macy's, the downtown Cincinnati-based retailer with 850 Macy's and Bloomingdale's stores and a surging online arm in Macys.com, expects layoffs to save the company $100 million beginning in 2009.

Relocation assistance for executives, severance and outplacement services will cost the company about $150 million in 2008.

The company plans to create a new district structure that could add 250 jobs - an approach that is modeled, in part, upon the packaged goods industry, Lundgren said in an interview Wednesday, one hour after the announcement.

"We are in the fashion business," Lundgren said. "We are not just selling tissues. You can't have the same shirt in 800 stores and assume success. Being in the fashion business, the product changes every few months and you have to anticipate. You need a hands-on organization."
Called "My Macy's," the localization initiative creates 20 districts of about 10 stores each.

Cincinnati will be the base for one district that could bring up to 40 jobs here.

The new approach, based upon customer research and developed over the past year, is an effort to accelerate sales growth with a custom-tailored shopping experience.

More managers will concentrate on bringing a better assortment of apparel to local markets based on shopping habits of customers in that region, Lundgren said.

"If we continue on the exact same course, we won't have dramatically different results," Lundgren said.

"If you want different results, you don't keep trying the same thing over and over again.
"We are actually putting more money and more investment into the local market with this structure," he said.

Lundgren said high gasoline prices and a nationwide housing slump have taken a toll on department store customers, making them more cautious.

Those were the macro issues," Lundgren said. "I suspect they will not be sorted out over the next couple of quarters. That's what the best minds are suggesting in Washington."

The company also said Wednesday that same-store, year-to-year sales, considered the best measure of a retailer's health, fell by 7.1 percent over 2006 results for the final four weeks of fiscal 2007.

company had advised shareholders that same-store sales for that period would be off by 4 percent to 6 percent.

For the 13-week fourth quarter of 2007, Macy's sales were $8.59 billion, down 6.1 percent from $9.16 billion reported for the same period in 2006.

Macy's will take a one-time pre-tax charge of $150 million in 2008 related to the consolidation.
Macy's also said Wednesday it will no longer offer guidance for quarterly sales or earnings. It expects the range of same-store sales for 2008 to be down 1 percent to up 1.5 percent.

, it told investors the company no longer expects to reach a goal of earnings as a percentage of sales before income tax, depreciation and amortization in the range of 14 percent to 15 percent in 2008-2009.

for 2007 were $26.31 billion, down 2.4 percent from sales of $26.97 billion in 53 weeks of the fiscal 2006 calendar.

On a same-store basis, sales were down by 1.3 percent in 2007 compared with 2006.
Macy's expects fourth-quarter earnings per diluted share to be between $1.75 and $1.80, which excludes merger integration costs of about $70 million.

Job losses will occur when Macy's consolidates its Minneapolis-based Macy's North into the New York-based Macy's East, its St. Louis-based Macy's Midwest into Atlanta-based Macy's South and its Seattle-based Macy's Northwest into Macy's West. The Atlantadivision will be renamed Macy's Central.

Al Ferara, national director of retail services for BDO Seidman, an accounting and consulting firm based in New York City, said Macy's, which has headquarters in New York City, had no choice but to slash the payroll because of the tough economic climate. "I expect that sales for the upcoming year are not so glossy," Ferara said. "You have to react to that, and now is the perfect time."

in Macy's closed Wednesday at $23.94, down $1.16 or 4.62 percent.

Source: local business