Macy’s cutting thousands of jobs as part of big cost-cutting initiative

Macy’s lowered the ax on Wednesday, announcing major cost-cutting moves on the heels of holiday sales that were much worse than expected.



During November and December, a period characterized by unseasonably warm weather in much of the country, Macy’s same-store sales declined 4.7%. Excluding the performance of leased departments, the comp decline was a more extreme 5.2%. Business conditions are not expected to improve with one month to go in the company’s fourth quarter period, with Macy’s forecasting comps for the full quarter will decline 4.7% compared to earlier guidance which called for a decline of 2% to 3%.



"The holiday selling season was challenging, as experienced throughout 2015 by much of the retailing industry," said Macy’s chairman and CEO Terry Lundgren. "In the November/December period, we were particularly disadvantaged by the historically warm weather in northern climate zones where both Macy's and Bloomingdale's are especially well-represented. About 80% of our company's year-over-year declines in comparable sales can be attributed to shortfalls in cold-weather goods such as coats, sweaters, boots, hats, gloves and scarves. We also continued to feel the impact of lower spending by international tourists as the value of the dollar remained strong.”



The weak results forced the company to reduce its full year profit forecast to a range of $3.85 to $3.90 per share compared to earlier guidance in the range $4.20 to $4.30.



In conjunction with the release of disappointing holiday results, Macy's said it was making some major cost cutting moves, including the previously announced closure of some 40 stores in 2016 (36 are due to close in early spring; the remaining four have already gone dark) and jobs cuts that will affect store level and headquarter staffing. The retailer plans to eliminate three to four positions in each of the 770 Macy’s and Bloomingdale’s stores that will remain after the closings, with a total of about 3,000 positions affected nationwide. Likewise, the company said it would implement voluntary separation agreements for about 165 senior executives, and that roughly 35 % of positions will not be replaced. It also plans to reduce an additional 600 positions in back-office organizations.



In additional cost-cutting moves, Macy’s is consolidating its four existing Macy’s credit and customer services center facilities into three. Its call center in St. Louis will close in the spring.



"In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations,” Lundgren said. "Moreover, we believe we can operate more effectively with an organization that is flatter and more agile so we can pursue growth and regain market share in our core Macy's and Bloomingdale's omnichannel businesses faster and with more intensity. We will continue to invest in strategic initiatives that anticipate emerging customer needs and create shareholder value. The cost efficiencies represent more than two-thirds of our goal of annual SG&A expense reduction of $500 million, net of growth initiatives, from previously planned levels by 2018. In some cases, there will be short-term pain as we tighten our belt and realign our resources. But our eye is on a long-term vision of Macy's, Inc. as a dynamic retailer that serves existing customers and acquires new ones through innovative approaches to the marketplace."



Those innovative approaches were on display during the holidays when one of the bright spots was growth in digital areas. Lundgren said during the November and December period the company filled nearly 17 million online orders at Macys.com and Bloomingdales.com set a new record and represented 25% growth.



“This validates the strength of our omnichannel strategy and related investments which we made over the past decade and will continue into the future," Lundgren said.



The company also reiterated its commitment to its Bluemercury specialty store format, with plans to open about 40 stores during the next two years. It also plans to open about 50 additional Macy’s Backstage off-price locations, most of which will be inside existing Macy’s stores.