Sweeping Changes, Job Cuts at Macy's Inc.
Macy’s Inc. announced Feb. 2 sweeping changes to the way the national department-store chain does business, including a measure that will transform Macy’s California operations.
The San Francisco–based Macy’s West division will close, and 1,200 Macy’s West jobs will be cut. The Macy’s West jobs are scheduled to end April 30. Macy’s will open San Francisco– and Los Angeles–based regional offices, scheduled to be in May.
The new regional offices will employ around 40 people, many of whom will be merchants. Their main task will be to ensure individual Macy’s stores will be stocked with merchandise suited to customers shopping there. “They will be adding a lot of brainpower, eyes and ears in the local markets,” said Macy’s Inc. spokesperson Jim Sluzewski.
The central buying department for Macy’s Inc. will be headquartered in New York; however, small teams of contemporary apparel buyers will be located in Los Angeles and San Francisco.
The big changes are part of the retailer’s My Macy’s program of restructuring, which is intended to cut costs and make the suffering retailer more competitive.
To help save money, Macy’s Inc. will handle all of its finance, human resources and buying out of its New York headquarters. Because many back-office operations will be moved to New York, duplicate jobs based at the former divisional headquarters were cut.
These divisional headquarters included Macy’s West; Macy’s Central, based in Atlanta; and Macy’s Florida, located in Miami. The New York–based Macy’s East region also will be closed. Its offices will be used for the central Macy’s Inc. office. The changes will result in the elimination of 7,000 positions, or about 4 percent of Macy’s Inc.’s workforce.
However, Macy’s intends its centralized buying to be tailored to individual stores. The customization efforts will be the main task for 1,200 new merchants who will be hired between February and April. Many of the new merchants will be hired from Macy’s staff. They will work in eight new regional offices across the United States. The new regional offices will help operate 69 districts of Macy’s stores across the United States. An individual district will direct 10 to 12 stores each.
Macy’s tested this way of organizing and operating stores last year in a pilot program in the Upper Midwest and Pacific Northwest. Prior to the pilot program, these stores were “significantly underperforming compared to the rest of the company,” Sluzewski said. “Quickly, they were outperforming the rest of the company [after instituting the new program].” He declined to state by what percentage these stores’ sales increased.
Macy’s Inc.’s restructuring plan will likely help the retailer achieve a cost savings of $250 million in 2009 and $450 million in 2010, wrote retail analyst Michael Exstein of Credit Suisse in a Feb. 2 research note. However, Macy’s still has unresolved problems in effectively communicating its advertising messages and remains in danger of surrendering market share to its competitors.
The San Francisco regional office will be located in former Macy’s West offices in the city’s fashionable Union Square section. The San Francisco office will be the headquarters of the retailer’s Northwest Region, which will help administer districts of stores in Northern California, the Pacific Northwest and Rocky Mountain states.Los Angeles’ regional offices will be located in the retailer’s existing administrative offices in North Hollywood. The Southwest Region headquarters will serve districts of stores in Southern California, Southern Nevada, Arizona, New Mexico, Hawaii and Guam.
On Feb. 2, Macy’s announced a new executive team. Terry J. Lundgren will remain in his job as Macy’s chairman, president and chief executive officer. Jeffrey Gennette, former chief executive of Macy’s West, was named Macy’s Inc.'s chief merchandising officer. He will be responsible for buying and merchandising for Macy’s nationwide as well as relations with market vendor partners. Gennette will relocate from San Francisco to New York.
The retailer’s Bloomingdale’s division will remain separate and will not be affected by the changes.
