Macy's slashing up to 7,000 jobs

updated 8:34 p.m. ET Feb. 2, 2009

NEW YORK - Macy’s Inc. announced Monday that it will eliminate 7,000 jobs, almost 4 percent of its work force, and cut capital spending, 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 on Monday, said it plans to integrate all its geographic divisions into a single unit.

Macy’s shares fell 4 percent Monday to close at $8.59.

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.

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 Monday to lower its annual selling, general and administrative expenses 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 on 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 on Monday after the announcement.

The news from Macy’s came as the government released yet another batch of bad news on consumers’ financial health: Consumer spending fell for a record sixth straight month in December as financially strapped households, worried about rising layoffs, increased their savings rates to the highest level since May, federal officials said Monday.

Department stores have been especially hard-hit by the poor economy as shoppers cut spending and turn to discount stores. Last month, Fresno, Calif.-based department store chain Gottschalks Inc. put itself up for sale and said it had filed to reorganize in a Chapter 11 bankruptcy. Dallas-based Neiman Marcus Group Inc. said this 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.

Lundgren said the strategy has worked well so far, pointing to the fact that 13 of Macy’s 15 top-performing geographic markets in December were part of the pilot program.

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.

In a phone interview with The Associated Press on Monday, CEO Lundgren acknowledged that he would have preferred to take more time with the national rollout. But, given the weak economy, he said, “You have to take action now.”

MORE FROM RETAIL

Retail Section Front

NYT: Credit card issuers share pain with users Banks’ struggle may mean end of free checking Scared retailers create shortages of hot toys Cadbury rejects hostile bid from Kraft Foods Wal-Mart, Amazon, Target in DVD price war Who’s your patty? Not McDonald’s October sales offer some relief to retailers Borders to close 200 Waldenbooks, cut jobs ConsumerMan: Chinese drywall a big threat 7-Eleven is getting into the value wine business Retail Section Front   Add Retail headlines to your news reader: