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Macy’s to Reorganize Divisions

North, Midwest and Northwest divisions to be merged into East, South and West units, respectively.

Struggling with a tough sales climate and a merger that’s been challenging, Macy’s Inc. plans to consolidate its Macy’s North, Macy’s Midwest and Macy’s Northwest regional divisions into Macy’s East, Macy’s South and Macy’s West, respectively.

 

The retailer will take a one-time, pretax charge of about $150 million this year as a result of the regional office restructuring.

 

Along with the consolidation announcement Wednesday, which confirmed a WWD report the same day, the retailer disclosed a “My Macy’s” localization strategy, involving new initiatives geared to accelerate sales growth by ensuring stores have assortments, sizes, marketing and shopping experiences that are tailored to the particular tastes and needs of the communities where they are located.  Macy’s said it will beef up management at the local level and establish districts of 10 stores.

 

The savings from the divisional consolidation process, net of the amount invested in localization initiatives and increased store staffing levels, are expected to reduce Macy’s selling, general and administrative expenses by approximately $100 million, beginning in 2009. The partial-year reduction in SG&A for 2008 is estimated at approximately $60 million.

 

“Improving sales and earnings performance requires innovation in engaging our customer more effectively in every store, as well as reducing total costs,” said Terry J. Lundgren, Macy’s Inc. chairman, president and chief executive officer. “We believe the right answer is to reallocate our resources to place more emphasis and talent at the local market level to differentiate Macy’s stores, serve customers and drive business.

 

“In essence, we plan to drive sales growth by improving our knowledge at the local level and then acting quickly on that knowledge. These moves will benefit our customers as well as our shareholders,” Lundgren added. “In addition, we believe our new strategies will speed up decision making and simplify the process of working with our vendors.”

 

Macy’s acquired May Department Stores in 2005 and has experienced disappointing results at many of the former May doors converted to Macy¹s.

 

For complete coverage, see Thursday's WWD.

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