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Macy's outlines cost reduction initiatives
09
Jan '14
Macy’s, Inc. announced it will implement focused cost reductions, including organizational changes, as it prepares to sustain profitable sales growth in the years ahead.

“Our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s, Inc. We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope.

"As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers,” said Terry J. Lundgren, Macy’s, Inc. chairman, president and chief executive officer.

“The actions being announced reinforce our focus on continuous improvement in our M.O.M. strategies (My Macy’s localization, Omnichannel integration and Magic Selling customer engagement) and will help us to maximize the impact of the exceptional talent we enjoy at every level of our organization,” Lundgren said.

Changes being announced are estimated to generate savings of approximately $100 million per year, beginning in 2014. These savings are incorporated in the company’s 2014 earnings guidance.

In conjunction with the implementation of these cost reductions, as well as of store closings and asset impairment charges, an estimated $120 million to $135 million of charges, of which $50 million to $55 million is expected to be non-cash, will be booked in the fourth quarter of 2013. These charges were not previously included in earnings guidance provided by the company.

Operating Cost Reductions

Cost reductions and organizational changes reflect learnings from the implementation of business strategies and new technologies at Macy’s in recent years. Changes include:

Within the Macy’s stores organizational structure, combining the Midwest Region with the North Region – thus creating a new North Central Region and reducing the ongoing number of regions to seven from the current eight. Nine existing stores districts also are being combined with nearby districts – thus reducing the ongoing number of districts to 60 from the current 69. In some cases, Macy’s stores are being reallocated within the seven regions and 60 districts to equalize workloads and spans of control;

In the Merchandise Planning organization, eliminating the district planner role for soft home categories. Experience has shown that home assortments, unlike apparel and accessories, change less often, are more congruent across the country and less subject to localization. Going forward, responsibility for soft home planning will be shifted to the regional and national level.

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