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Macy's to centralize, cut 7,000 jobs
February 02, 2009
Cincinnati--Macy's Inc. has announced a series of cost-cutting measures that will jettison its regional divisions, create a unified corporate structure and eliminate 7,000 jobs, with most of the cuts focused on central office executive positions.
The initiatives, announced on Monday and designed to shore up the retailer's finances until the economy improves, are projected to save about $250 million in the remainder of 2009 and $400 million in 2010. The new Macy's Inc. executive management team will continue to be led by Terry J. Lundgren, who currently serves as Macy's chairman, president and chief executive officer.
"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," Lundgren said in a media release issued on Monday. "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."
The net reduction of 7,000 positions represents about 4 percent of the company's total current workforce of about 180,000 positions. The cuts include positions in stores and distribution centers, but there will be a much higher percentage of cuts in central office functions, with nearly 40 percent of executive positions being slashed. In some cases, the reductions involve positions that are not currently filled.
Other than the previously announced closure of 11 Macy's stores, all current Macy's and Bloomingdale's store locations will remain in place, as will Macys.com and Bloomingdales.com.
The plan involves an expansion of "My Macy's," a customer-focused initiative piloted in 20 selected geographic markets since spring 2008, which will now be expanded across the United States. The net reduction of employees includes approximately 1,200 positions that are being added to new My Macy's districts and regions.
The My Macy's program aims to drive sales "with a compelling national brand and with stores and merchandise assortments focused on local customer needs and preferences in each location," the release said.
The new structure is expected to reduce central office and administrative expense, eliminate duplication, sharpen execution and help the company partner more effectively with its suppliers and business partners.
Bloomingdale's will remain a separate brand and organization and will not be affected by any of the changes, the company said.
There are also changes in store for Macy's investors. Its 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.
"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," Lundgren said in the release. "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."
Beginning in the second quarter, Macy's stores nationwide will be grouped into 69 geographic districts that will average 10 to 12 stores each. Of those, 49 will be newly created districts. The other 20 districts (in the Midwest, Upper Midwest and Pacific Northwest) were created as pilots in spring 2008 and will remain in place, the release said.
The 69 Macy's districts will be grouped into eight regions that will be based in the Chicago, Houston, Miami, Fla., Los Angeles, New York, Pittsburgh, Pa., San Francisco and Washington, D.C., areas. Each region will include an organization consisting of 35 to 40 executives who will oversee merchandising, planning and various support operations. Special events and marketing public relations staffs also will be located regionally around the country.
Effective immediately, the company will begin the process of eliminating its Macy's division structure and integrating all functions into a single organization. Macy's central buying, merchandise planning, stores senior management and marketing functions will be located primarily in New York.
Corporate-related business functions such as finance, human resources, law, property development and purchasing--including those now performed at the division level--will be located primarily in Cincinnati. While the size and nature of some functions based in New York and Cincinnati will be adjusted to align with current business needs while others are centralized for efficiency, Macy's Inc.'s net workforce in these two cities is expected to increase nominally to support the nationwide Macy's business.
The elimination of existing divisional central office organizations will primarily affect approximately 1,400 positions at the Macy's West headquarters offices in San Francisco, approximately 850 positions at the Macy's Central headquarters offices in Atlanta, and approximately 600 positions at the Macy's Florida headquarters offices in Miami.
A number of executives currently in the Macy's West, Macy's Central and Macy's Florida central organizations will be reassigned to new region and district roles, or considered for new positions in New York and Cincinnati, the release said. While New York-based Macy's East will no longer exist as a division going forward, many members of the current division merchandising, planning, stores management and marketing staffs will be part of the new unified organization.
In addition, the New York-based Macy's "Home Store" and Macy's corporate marketing divisions will no longer exist as separate entities. The former will be integrated into the Macy's national merchandising, merchandise planning, stores and marketing organizations, and the latter will be integrated into the new unified marketing organization. The New York-based Macy's merchandising group will be refocused solely on the design, development and marketing of Macy's family of private brands.
The plan also includes changes for the employees that remain. Merit salary increases for executives considered in spring 2009 for performance in 2008 are being eliminated company-wide. The company will cut its matching funds to employee 401(k) plan contributions in 2009. In addition, management will be recommending that the board of directors reduce executive perks, including merchandise discounts, company cars, company-paid life insurance and financial counseling.
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