Macy's Plans to Cut Jobs as Sales Tumble More Than Forecastby
Department-store chain will fire or relocate about 3,000
Company also may sell portion of its iconic New York flagship
Macy’s Inc. will fire or relocate about 3,000 workers and explore options for its real estate after the largest U.S. department-store company suffered a worse holiday period than it expected.
The company is cutting staffing levels and shrinking its store count to match the lower sales volume, part of a plan to shave $400 million in annual expenses, according to a statement on Wednesday. The changes will affect three to four workers at each of about 770 Macy’s and Bloomingdale’s stores -- about 2 percent of its total workforce -- though half of those employees are expected to be offered other jobs. It’s also shutting 40 Macy’s locations, following through on an announcement in September.
The moves pleased investors. Shares rose 2 percent to $36.89 in New York, even as the Standard & Poor’s 500 Index fell 2.4 percent. Macy’s stock tumbled 47 percent last year.
The chain’s same-store sales-- a key benchmark for retailers -- fell 4.7 percent in November and December, reflecting a dismal holiday season for department stores. The company had expected a drop of 2 percent to 3 percent. Warm weather in much of the U.S. took a toll on sales of winter clothing, Chief Executive Officer Terry Lundgren said.
“We were particularly disadvantaged by the historically warm weather in northern climate zones where both Macy’s and Bloomingdale’s are especially well-represented,” he said in the statement. “We also continued to feel the impact of lower spending by international tourists as the value of the dollar remained strong.”
The trend is unlikely to improve in January, Macy’s said, putting pressure on the chain to make cutbacks. The retailer lowered its earnings forecast for the fourth quarter to $2.18 to $2.23 a share, down from a November forecast of at least $2.54. Analysts had estimated $2.55.
The company also plans to eliminate 600 back-office jobs, with about 150 of those positions getting reassigned. And it’s offering buyouts to 165 senior executives; about 35 percent of those jobs won’t be replaced. Macy’s had 166,900 employees at the end of the last fiscal year.
Macy’s also faces pressure from activist investor Starboard Value, which wants the retailer to get more value from its property holdings.
The retailer said in November that it won’t form a real estate investment trust, an effort Starboard endorsed. Instead, Macy’s said on Wednesday that it’s seeking to sell portions of its flagship Manhattan, San Francisco, Chicago and Minneapolis stores, as well as mall-based properties. Tishman Speyeris interested in taking stakes in the flagship locations, Macy’s said.
“We can operate more effectively with an organization that is flatter and more agile,” Lundgren said, “so we can pursue growth and regain market share.”