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Macy's sales dive prompts consolidation
February 07, 2008
Cincinnati—Same-store sales at Macy's Inc. decreased 7.1 percent for the four weeks ended Feb. 2, and total sales plummeted 28.4 percent to $1.275 billion, compared with $1.782 billion for the five weeks ended Feb. 3, 2007, the company announced today.
The company primarily attributes this loss to one fewer week in the January 2008 calendar versus January 2007.
Total sales for the 13-week fourth quarter of fiscal 2007 reached $8.597 billion, down 6.1 percent from total sales of $9.159 billion for the final 14 weeks of 2006. On a same-store basis, the company's fourth-quarter sales were down 2 percent.
For the 52 weeks of fiscal 2007, Macy's sales totaled $26.316 billion, down 2.4 percent from total sales of $26.970 billion for the 53 weeks of fiscal 2006. On a same-store basis, Macy's sales were down 1.3 percent.
Along with it's year-end report, Macy's announced new initiatives to strengthen local market focus and enhance customer service.
Chief among these initiatives is a localization plan called "My Macy's," which aims to accelerate sales growth in existing locations by ensuring that core customers surrounding each Macy's store find merchandise, sizes, marketing programs and shopping experiences that are custom-tailored to their needs.
To achieve this, Macy's will concentrate more management in local markets, create new positions to work with division central planning and buying executives to understand the needs of local customers, and empower locally based executives to make more and better decisions.
This new structure will be adopted for those geographic markets that have been a part of Macy's North, Macy's Midwest and Macy's Northwest as they are consolidated into Macy's East, Macy's South and Macy's West, respectively.
Effective immediately, Macy's will begin consolidating its Minneapolis-based Macy's North organization into New York-based Macy's East, its St. Louis-based Macy's Midwest organization into Atlanta-based Macy's South and its Seattle-based Macy's Northwest organization into San Francisco-based Macy's West. The Atlanta-based division will be renamed Macy's Central. All current store locations will remain in place.
These consolidations are expected to be completed in the second quarter of 2008 and will affect approximately 2,550 positions, which the company estimates will reduce its SG and A (selling, general and administrative) expenses by $60 million in 2008, and by $100 million beginning in 2009.
Executives currently in the Macy's North, Macy's Midwest and Macy's Northwest central organizations will be considered for positions in the new local market organization or for open positions elsewhere in the company. Employees laid off in this process will be provided severance benefits and outplacement assistance.
The company's Miami-based Macy's Florida and New-York based Bloomingdale's divisions will not be affected.
The consolidated Macy's East, Macy's South and Macy's West organizations will be grouped into 20 newly formed districts of about 10 stores with a manager and small staff of store merchandisers and planners.
A total of approximately 250 new district and region positions will be based in these local markets adopting the new model, which will roughly double the number of management positions in the field in these markets.
"Improving sales and earnings performance require innovation in engaging our customer more effectively in every store, as well as reducing total costs," Macy's chairman, president and chief executive officer Terry J. Lundgren said in a statement. "We believe the right answer is to reallocate our resources to place more emphasis and talent at the local market level to differentiate Macy's stores, serve customers and drive business."
As a result of the consolidations, fine-jewelry retailer Finlay Enterprises Inc. announced that 94 of its total 316 Macy's locations will not be renewed upon expiration of the license agreements on Jan. 31, 2009.
This includes 57 doors in Macy's North, and 37 doors in Macy's Northwest.
Macy's has notified Finlay of its intent to renew the license agreements for the newly merged division of Macy's Midwest and Macy's South (222 doors).
Finlay Enterprises Chairman and Chief Executive Officer Arthur E. Reiner said in a statement that although they are disappointed with the prospect of losing part of their Macy's business, they will still retain 222 Macy's locations and all of their Bloomingdale's locations.
In fiscal 2007, the Macy's North and Macy's Northwest locations generated approximately $120 million in combined revenue for Finlay.
Looking ahead, Macy's says it is assuming a continued challenging economic environment through most of 2008, with some modest improvement expected by the fourth quarter. Given the uncertain macroeconomic environment, the company's range for same-store sales guidance for 2008 is wider than usual: down 1 percent to up 1.5 percent.
Effective with 2008, the company has decided to no longer provide quarterly sales or earnings guidance.
Macy's Inc., with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2007 sales of $26.3 billion. The company operates more than 850 department stores in 45 states, the District of Columbia, Guam and Puerto Rico under the names of Macy's and Bloomingdale's. The company also operates Macys.com, Bloomingdales.com and Bloomingdale's By Mail.
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