Macy's CEO sees closing up to 10 stores next year

A woman shops at the Macy's store at a mall in a Denver suburb in this May 16, 2008 file photo.

NEW YORK (Reuters) - Macy's Inc (M.N) expects to close up to 10 stores next year and is in a position to use $950 million in cash to pay down debt, its chief executive said on Friday.

CEO Terry Lundgren said the second-largest U.S. department store operator typically closes as many as 10 underperforming stores a year and expects to do the same for next year. It will also delay remodeling projects as it grapples with the worst retail environment in around 20 years.

Macy's and other retailers slashed prices and ramped up the gimmicks to get customers in the door and spending money on "Black Friday," the traditional start of the holiday shopping season.

To generate excitement among customers already bombarded with price-slashing deals, Macy's had around 200 "door-busters" on Friday, including $25 cashmere scarves and a 2-carat diamond bracelet for $99.

The retailer even hired fitness guru Richard Simmons to liven things up for the 5,000 people waiting for a 5 a.m. opening at its flagship Herald Square store in New York City.

"People are clearly coming out and that's what we wanted to make sure of. It's a very competitive day today. We were very aggressive with our pricing and values throughout the stores," Lundgren told Reuters in an interview.

Earlier this month, Macy's reported a quarterly loss and said it feared a prolonged retail downturn as the U.S. economy contracts.

Shares in the company fell 1 percent on Friday.

SHARING PRICE CUTS WITH VENDORS

Many retailers have adopted a very aggressive strategy of price cuts for the holiday season as they defend their turf against discounters like Wal-Mart Stores Inc (WMT.N).

The shopping season between Thanksgiving and year's end can account for up to 40 percent of sales for some companies.

Retail peer J.C. Penney (JCP.N) is holding 20 percent more specials than the year before, while mid-priced department store Kohl's (KSS.N) halved prices on toys and slashed its only-at-Kohl's apparel brands like Vera Wang and Daisy Fuentes up to 50 percent.

But Macy's is also using its position as one of the largest department stores in the U.S. to negotiate sharing margin cuts with vendors as it slashes prices this holiday season to stay competitive, Lundgren said.

"One of the great advantages of being the largest customer to practically everyone you do business with is sharing in margin with our vendor and suppliers. We work together with our vendors and make sure when we are pricing these items, we are doing it in agreement with them," Lundgren said.

Macy's will continue to mark down items throughout the season to try to sell out much of the stock from its stores and avoid being stuck with excess merchandise in January, he said.

Lundgren said Macy's will probably use cash to pay down $950 million in debt it has coming due early next year, but "we'll see how it goes as it grows closer."