Blog: Leonie BarrieWill local market focus save Macy’s?

Leonie Barrie | 4 February 2009

Overshadowed by yesterday’s announcement that Macy’s is to slash its headcount by 7,000 jobs as part of plans to cut costs by centralising its operations, the department store retailer actually had some good news to report.

Its My Macy’s concept, which tailors merchandise to the needs of local customers, is to be rolled out nationwide after the format proved a runaway success since its launch in 20 geographic markets last spring.

“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,” CEO Terry J Lundgren said. “In fact, of the company’s top 15 best-performing geographic markets in December, 13 were My Macy’s pilot districts.”

The retailer hopes to drive sales by making sure shoppers can find the brands, the colours, the fabrics and sizes that they want, when they want them. And hopefully they’ll keep coming back for more.

Under the new structure, the Cincinnati-based company will regroup all its US stores into 69 geographic districts that will have 10 to 12 stores each.

Significantly, Macy’s is reverting to a centralised business model across functions like strategic planning, finance, technology and human resources, and giving more merchandising power to district managers.

This should not only cut costs but also eliminate duplication when it comes to buying merchandise and make it easier and quicker to work with suppliers.

The changes are the latest in the unravelling of Macy’s department store empire four years after it bought May Department Stores with the vision of setting up a nationally branded chain – only to find the New York based Macy’s name had little resonance with shoppers outside metropolitan areas.

It’s also the second restructuring in 12 months. A year ago Macy’s took the axe to 2,300 jobs and restructured into three divisions, and just last month it decided to close 11 stores with the loss of 960 employees.

Like many department store retailers, Macy's has struggled to gain momentum as consumers cut back on apparel and other discretionary items. The Chapter 11 bankruptcy filing of Gottschalks, and the loss of 375 jobs at Neiman Marcus are indicative of just how tough it is for this sector right now.

But tied into the health of department stores are the apparel vendors selling to these giant chains. One, Liz Claiborne, is to eliminate about 725 jobs or 8% of its US workforce as it tries to bring costs in line with weak sales it said yesterday.

The apparel firm, whose brands include Kate Spade, Juicy Couture, Lucky Brand and Mexx, has previously made no secret of the fact its recent losses are in part due to increased markdowns at its department store customers.

It will no doubt be alarmed by Macy's weak 2009 guidance, which forecasts a 6% to 8% drop in same-store sales and earnings of $0.40 to $0.50 per share.


US: Macy's axing 7,000 jobs, rolling out local store concept


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