CINCINNATI, – Macy’s, Inc. (NYSE:M) today announced a series of actions designed to position the company for increased sales, profitability and cash flow. These moves will prepare the company for accelerated growth once the economy recovers while reducing previously planned expenses by approximately $400 million per year beginning in 2010 (and $250 million in the partial year of 2009).
“My Macy’s,” a customer-centric localization initiative piloted in 20 selected geographic markets since spring 2008, will be expanded across the U.S. As a result, Macy’s will drive sales with a compelling national brand and with stores and merchandise assortments focused on local customer needs and preferences in each location.
As My Macy’s is rolled out nationally to new local markets, Macy’s, Inc. will be re-formed into a unified operating structure to support the Macy’s business. This is expected to reduce central office and administrative expense, eliminate duplication, sharpen execution, and help the company to partner more effectively with its suppliers and business partners. Bloomingdale’s will remain a separate brand and organization and is not affected.
Given current economic conditions and expectations for lower sales in 2009, the company is taking other actions to increase profitability and cash flow. Macy’s, Inc. is adjusting its workforce in stores, distribution centers and various corporate functions, as well as reducing discretionary spending. Moreover, the Board of Directors has voted to reduce the Macy’s, Inc. quarterly dividend to 5 cents per share of common stock from the current 13.25 cents. And the company today commenced a tender offer to redeem $950 million in debt that is maturing later in 2009.
A new Macy’s, Inc. executive management team will lead the corporation going forward under the continued direction of Terry J. Lundgren, chairman, president and chief executive officer.
(Editor’s Note: Macy’s, Inc. this afternoon also issued a separate news release providing details of a tender offer for debt maturing later in 2009. A conference call with analysts and investors will be conducted at 2:30 pm ET today. Details are provided at the end of this news release.)
“We have been very encouraged by early results from our My Macy’s district structure in capturing new sales opportunities in pilot markets over the past year,” Lundgren said. “In fact, of the company’s top 15 best-performing geographic markets in December, 13 were My Macy’s pilot districts. We are moving quickly and decisively to expand this model to all of our markets so we can pursue sales-driving opportunities as we position ourselves to capture share in every local market.
“In addition, and especially 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. That includes reducing expenses and conserving cash so we can remain financially healthy. In the short- and long-term, the actions being announced today will make us a more lean and efficient company and a stronger competitor,” Lundgren said. “With our new structure, Macy’s now will have one unified buying organization, one unified merchandise planning organization, one unified stores organization, one unified marketing organization and one unified organization for each corporate function such as finance, logistics, information technology and human resources – instead of four of each operating divisionally. By reducing duplication, we will be able to react faster to market trends, simplify our relationship with vendors and ensure that our expense dollars are devoted to activities that will drive the business most effectively.”
A net companywide total of approximately 7,000 positions are being eliminated from the company’s workforce in offices, stores and other facilities. This total includes approximately 1,200 positions being added to new My Macy’s districts and regions.
The net reduction of 7,000 positions represents about 4 percent of the company’s total current workforce of about 180,000 positions. (Note that the reduction is a much higher percentage in central office functions being centralized, where nearly 40 percent of executive positions are being eliminated.) In some cases, the reduction involves positions that currently are unfilled. Employees whose positions are eliminated will have the opportunity to express interest in other available positions. Employees who are laid off in this process will be provided severance benefits and outplacement assistance.
“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 as we proceed into a very exciting future for Macy’s and Bloomingdale’s,” Lundgren said. “Be assured we will be sensitive to all affected employees, work diligently to find other positions for as many of them as possible, and treat everyone with respect and honesty.”