Macy's m plans to slash about 7,000 jobs and cut its quarterly dividend because of dismal sales this year.
The department store chain said it expects its 2009 same-store sales to be down 6% to 8%, hampered by a weak spring but rebounding slightly in the fall.
To help reverse the sales declines, Macy's is expanding a program that tailors merchandise to different markets. Macy's CEO Terry Lundgren says the company's stores will be grouped into an additional 49 geographic districts on top of the 20 areas that are already part of the retailer's "My Macy's" initiative. The move will contribute to the net reduction of 7,000 jobs but create 1,200 district and regional positions.
The remainder of the job cuts will come from the elimination of the firm's geographic divisions around the U.S. and the consolidation of buying out of New York.
The My Macy's program allows stores to stock items unique to the local market; for example, more swimsuits offseason if a store is across the street from a year-round water park, as one store in Minneapolis is. Lundgren says that 13 of the best-performing markets had the localized merchandise program during the holiday season.
Retail stock analyst Jennifer Black says Nordstrom jwn was criticized for years for having this type of local approach to merchandising, because analysts would argue that it was too costly. Nordstrom, it was suggested, should be "more like Macy's."
"But with today's situation, with all these retailers carrying way less inventory, they better be right in what they're carrying or they won't have any sales," Black says.
Macy's said the job cuts and other cost-cutting moves will reduce expenses by about $400 million a year starting in 2010 and $250 million in 2009.
"We just believe this is a time that nothing should be considered a sacred cow," Lundgren said in a conference call with investors and analysts, noting that cuts were made in most areas, including information technology and corporate sales.
In all, about 4% of the Macy's workforce will be cut; 40% will be executive level in central offices.
Most retailers other than Wal-Mart and a few teen-targeted retailers have been hit hard in this economy, but Macy's December sales were actually better than nearly all of its department store competitors. Even with a 4.0% sales decline, it outperformed J.C. Penney jcp, Neiman Marcus and Nordstrom by a wide margin. Only Kohl's kss, with a 1.4% decline, did better.
Phil Rist, executive vice president of consumer intentions firm BIGresearch, says, "There's nothing wrong with department stores. What we have is a crisis of confidence.
"Every week there's a different retailer talking about (job cuts)," says Rist. "The more consumers hear about these types of layoffs, the more they tighten the grip on their money."
The Macy's board also voted to reduce the quarterly dividend from 13.25 cents to 5 cents a share of common stock. Macy's shares closed 36 cents lower at $8.59.