American department store chain Macy's Inc. announced Monday that it will eliminate 7,000 jobs, almost 4 per cent of its work force, and cut capital spending, reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash amidst a severe pullback in consumer spending.
Macy's said the job cuts, which include some unfilled positions and 1,900 being eliminated in a future restructuring, will come at corporate offices, stores and other locations. It employs about 180,000 people. The company, which also delivered downbeat earnings and sales forecasts for the year on Monday, said it plans to integrate all its geographic divisions into a single unit.
The company said it expected the reorganisation, and a separate drive to reduce costs across its businesses, to result in $400 million in annual savings from 2010, and to deliver an initial $250 million of savings in its current fiscal year. However, it also said it expected to incur a $400 million cash charge, mostly in its current year, as a result of severance and other costs.
The chain's attempt to restructure its organization and centralize its merchandising is the finalisation of a long-standing strategy, not the knee jerk-result of the recession, said Vice Chairman Tom Cody.
Cody, who on 2 February also announced his pending retirement from Macy's in early 2010, said the roll-out of the "My Macy's" program nationwide is evidences that a pilot program launched last February works. The merchandising programme, tested in 20 markets was designed to attune the fashion offerings of each store to its specific market. The programme also meant the consolidation of several divisional offices, into four. Now that it will be rolled out to all of Macy's 808 stores, each of those remaining divisions will be split into a number of small buying districts.
In its pilot, the My Macy's programme revealed interesting findings about shopper behavior. At the Mall of America, for instance, Macy's discovered that a lot of vacationing families go school shopping over the summer. So it filled the store with denim earlier than usual. Of the 15 best performing geographical areas in the country this December, 13 were My Macy's pilot districts.
"We see the power in the local input from our experience over the past year," Cody said. "We know the critical piece comes from the intelligence of the local market."
Staff reductions and other moves to restructure the company's operations, including grouping stores by region for merchandising purposes, will help make the Cincinnati-based retailer "more lean and efficient," CEO Terry J Lundgren said.
"In the current challenging economy, we must operate in a responsible manner that allows us to maximize the value we offer to our customers and enhance our profitability," he said. "Reducing our workforce is an unfortunate outcome of the current economic environment, and I am frustrated that so many of our people will be unable to move forward with us."