Macy's Inc. announced yesterday that it will cut 7,000 jobs, almost 4 percent of its work force, and reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash amid a severe pullback in consumer spending.
The Cincinnati-based department store chain also announced the national rollout of a plan to localize merchandising to specific markets, which it began in some regions last year.
The company, which also delivered downbeat earnings and sales forecasts for the year, said it plans to integrate all its geographic divisions into a single unit.
Macy's said the job cuts, which include some unfilled positions and 1,900 being eliminated in the restructuring, will come at corporate offices, stores and other locations. The company employs about 180,000 people. The company has eight stores in the Baltimore region.
Macy's announced last month - on the heels of the worst holiday shopping season in decades - that it would close 11 stores, affecting 960 employees. The company expects the additional actions announced yesterday to lower its annual selling, general and administrative expenses by about $400 million per year, starting in 2010.
The company also slashed its quarterly dividend to 5 cents from 13.25 cents. The dividend will be paid April 1 to shareholders of record March 13.
"We just believe that this is a time when nothing should be considered a sacred cow," Macy's chief executive, Terry J. Lundgren, said in a conference call with analysts after the announcement.
Department stores have been especially hard-hit by the poor economy as shoppers cut spending and turn to discount stores. Dallas-based Neiman Marcus Group Inc. said last month that it was cutting about 375 jobs, or 3 percent of its work force.
Macy's began testing the localization strategy in 20 regional markets last spring and expects the reorganization to be complete beginning in the second quarter this year.
The idea is to concentrate Macy's top talent in local markets and better stay on top of trends by grouping Macy's stores nationwide into 69 geographic districts of 10 to 12 stores each. Twenty of the districts - in the Midwest, upper Midwest and Pacific Northwest - were created as pilots in spring 2008 and will remain in place.
The localization plan began last year as the company struggled with disappointing sales in some markets where the Macy's name replaced a local favorite as the company absorbed May Department Stores Co. in 2005. Included in that switch was the Baltimore area's Hecht Co. The retailer also tried to reduce the use of coupons in 2007, reversing the decision when sales slowed.
Macy's moves received praise from Wall Street analysts.
"The environment is giving [Macy's] the opportunity to streamline its infrastructure," wrote Liz Dunn, an analyst at Thomas Weisel Partners LLC in a note released yesterday. "We believe that [Macy's] regional buying strategy has been an impediment to profitability."
Also to reduce expenses, Macy's is eliminating merit salary increases for executives in spring 2009 for performance in 2008, and it will cut its contributions to employees' retirement accounts this year.