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Macy's to shed 2,300 jobs

In a restructuring, the department store chain wants to cut costs and offset declining sales.

February 07, 2008|From Reuters

NEW YORK — Macy's Inc. announced a restructuring Wednesday that involves cutting 2,300 jobs and closing some division headquarters as the department store operator tries to reduce costs and offset declining sales.

Macy's also said January sales at stores open at least one fiscal year fell a more-than-expected 7.1% and forecast fourth-quarter earnings that, excluding a tax credit, would miss current Wall Street targets.

Terry Lundgren, Macy's chairman, president and chief executive, said the restructuring was designed to increase sales at stores open at least a year. So-called comparable-store sales are a key measure of retail health.

"If you're growing comp-stores sales, that means you're satisfying customers and you're taking market share, and that's what we're trying to do," he said.

Macy's, which also runs the Bloomingdale's chain of stores, said it would take charges of about $150 million this year for the restructuring, but added that the changes would reduce annual expenses by about $100 million starting in 2009.

Its shares fell $1.16, almost 5%, to close at $23.94.

Macy's, formerly called Federated Department Stores, acquired May Department Stores in 2005 and converted more than 400 of those outlets to the Macy's name in 2006 to create a national chain.

But the company has struggled in the last year, trying to boost sales at former May stores while facing a weakening economy that has curbed consumer spending. Its stock has fallen 40% in that time.

In December, it said it would close nine underperforming stores in Indiana, Ohio, Louisiana, Oklahoma, Utah and Texas.

As part of the changes announced Wednesday, Macy's said it would close regional division headquarters in Seattle, Minneapolis and St. Louis, cutting the division headquarters it operates to four from seven.

It will establish small "districts" of roughly 10 stores in cities such as Cleveland, Minneapolis and Salt Lake City, and those districts will report to new regional offices being established in Chicago, Cincinnati, St. Louis and Seattle.

Macy's said the new structure would improve sales by helping it better match items in its stores to the demands and trends of each local market.

Restructuring would eliminate roughly 2,300 positions, Macy's said. The retailer has 188,000 employees.

Though company executives hope the changes will boost sales, they assume that the economic environment will remain challenging through most of this fiscal year, with some "modest improvement" expected by the fourth quarter.

They said total sales for the four weeks ended Feb. 2 fell 28.4% to $1.28 billion, citing a retail calendar change resulting in one fewer week of sales in the month.

Macy's January comparable-store sales fell 7.1% while analysts, on average, expected a decline of 5.7% according to Reuters Estimates.

For the fourth quarter, the company expects to earn $1.75 to $1.80 a share. That forecast excludes merger integration costs of about $70 million, executives said, but includes a noncash tax credit of roughly 18 cents a share.

Analysts, on average, were expecting it to earn $1.68 a share, according to Reuters Estimates.

Macy's forecast earnings for its fiscal year ending in early 2009 of $1.85 to $2.15 a share, excluding one-time costs.

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