Macy's Cuts 7000 Jobs, Slashes Dividend In Reorganization Effort

Amidst bleak guidance reports, Macy's Inc. announced on Monday that it will cut 7,000 jobs or 4% of its workforce, as one of several steps to reorganize and cut costs.

"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," Terry Lundgren, Macy's Chief Executive said.

The company also announced that it will slash it's quarterly dividend 62% from 13.25 cents per share to 5 cents per share. This cut in dividend is expected to save the company $138M in cash for fiscal 2009.

Other actions to reduce expenses include eliminating merit salary increases across the company, a reduction of its match to employee 401(k) plan contributions in 2009, and cutting its capital expenditure budget to $450M from an original budget of $1 billion, saving $100M to $150M.

In a separate announcement, Macy's said it will repurchase outstanding $950M in debt that will mature later in 2009.

Broad reorganization efforts include a nationwide expansion of their "My Macy's" initiative, an experimental "customer-centric" program. Launched in 20 selected geographic markets in spring of 2008, "My Macy's" is used to identify and serve consumer needs location by location. The program will expand to 49 more districts in the second quarter.

"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.

Further reorganization will entail the elimination of Macy's geographic division structure in favor of a more "unified organization", centralizing the company's buying, merchandise planning, stores senior management and marketing functions in New York, while corporate business functions will be located in Cincinnati.

Macy's expects these moves to save them $250M in 2009 and $400M per year beginning in 2010.

Meanwhile, the outlook for Macy's continues to be bleak. The company predicts that same-store sales in 2009 will be down 6-8%. Earnings per share forecasts is in the range of $0.40 - 0.55 per share. On Monday, Moody's Investors Service said that it may cut its rating on Macy's into junk terrority, which would increase borrowing costs for the company.