Company to Strengthen Market Localization and Enhance Customer
Service While Consolidating Three Divisions
CINCINNATI--(Business Wire)--
Macy's, Inc. (NYSE:M) today announced new initiatives to
strengthen local market focus and enhance selling service which, in
combination with the consolidation of three Macy's divisions, is
expected to enable the company to both accelerate same-store sales
growth and reduce expense.
(Editor's Note: Macy's, Inc. this afternoon also issued a separate
news release reporting January 2008 sales.)
"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."
Localization Initiatives
Called "My Macy's," a localization initiative was developed over
the past year based on customer research, as well as input from Macy's
store managers, senior division executives, merchandise vendors and
industry experts. Its goal is to accelerate sales growth in existing
locations by ensuring that core customers surrounding each Macy's
store find merchandise assortments, size ranges, marketing programs
and shopping experiences that are custom-tailored to their needs.
To maximize the results from My Macy's, the company is taking
action in certain markets that will:
-- Concentrate more management talent in local markets,
effectively reducing the "span of control" over local stores;
-- Create new positions in the field to work with division
central planning and buying executives in helping to
understand and act on the merchandise needs of local
customers;
-- Empower locally-based executives to make more and better
decisions.
This new structure will be adopted for those geographic markets
that have been a part of Macy's North, Macy's Midwest and Macy's
Northwest as they are consolidated into Macy's East, Macy's South and
Macy's West, respectively (see next section for description of
consolidations).
Macy's locations in these markets will be grouped into 20 newly
formed districts of about 10 stores (compared with an average of 16 to
18 currently overseen by each regional manger). Districts will be
based in cities including Chicago, Cincinnati, Cleveland, Columbus,
Detroit, Indianapolis, Kansas City, Minneapolis, Pittsburgh, Portland,
Ore., St. Louis, Salt Lake City and Seattle. Each new district will
have a manager and a small staff of store merchandisers and planners.
These districts will report into their divisions through new regional
offices being established in Chicago, Cincinnati, St. Louis and
Seattle.
District-based executives will be empowered to make more local
decisions about space allocation, service levels and visual
merchandising, which the company believes will enhance execution.
Additionally, district-based planners will provide market-specific
intelligence to division planning offices. More resources also will be
provided to local markets for special events and to enhance customer
service.
A total of approximately 250 new district and region positions
will be based in those local markets adopting the new model. This will
roughly double the number of management positions in the field in
these markets.
Merchandise localization will be supported by a series of new
systems and technology being rolled out in 2008 to all Macy's
divisions (including Macy's Florida) to facilitate more detailed
store-level execution and assortment planning. In part, this will
allow merchants to more accurately assort each Macy's store with
items, brands, garment sizes and colors preferred by customers who
shop that specific location.
Division Organization Consolidations
Effective immediately, the company will begin consolidating its
Minneapolis-based Macy's North organization into New York-based Macy's
East, its St. Louis-based Macy's Midwest organization into
Atlanta-based Macy's South and its Seattle-based Macy's Northwest
organization into San Francisco-based Macy's West. The Atlanta-based
division will be renamed Macy's Central. All current store locations
will remain in place.
The consolidation of divisional central office organizations,
expected to be completed in the second quarter of 2008, will affect
approximately 950 positions at the Macy's North headquarters offices
in Minneapolis, 850 positions at the Macy's Midwest headquarters
offices in St. Louis, and 750 positions at the Macy's Northwest
headquarters offices in Seattle. Executives currently in the Macy's
North, Macy's Midwest and Macy's Northwest central organizations will
be considered for positions in the new local market organization or
for open positions elsewhere in the company. Employees laid off in
this process will be provided severance benefits and outplacement
assistance.
The company's Miami-based Macy's Florida and New-York based
Bloomingdale's divisions are not affected by today's announcement.
Financial Aspects
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, Inc. SG&A expense by
approximately $100 million, beginning in 2009. The partial-year
reduction in SG&A for 2008 is estimated at approximately $60 million.
Macy's, Inc. will take one-time pre-tax charges of approximately
$150 million in 2008 for expenses related to the division
consolidations. This will include relocation assistance for executives
being assigned, as well as severance and outplacement assistance for
displaced employees. In addition, there will be a slight negative
impact on gross margin in the spring season as inventories in the
consolidated divisions are aligned.
2008 Guidance
In fiscal 2008, Macy's, Inc. is assuming a continued challenging
economic environment through most of the year with some modest
improvement expected by the fourth quarter. Given the uncertain
macroeconomic environment, the company's range for same-store sales
guidance for 2008 is wider than usual: down 1.0 percent to up 1.5
percent.
Including this sales assumption and impact of the division
consolidations, Macy's, Inc. is assuming earnings per share on a
diluted basis of $1.85 to $2.15, excluding one-time costs, for fiscal
2008. Effective with 2008, the company has decided to no longer
provide quarterly sales or earnings guidance.
While the company still expects to reach its goal of increasing
EBITDA as a percentage of sales to the historic peak range of 14
percent to 15 percent, management does not believe it will do so in
the 2008-2009 time period because of the impact of lower-than-expected
sales growth in 2007 and 2008 due in large part to the macroeconomic
environment.
The company is budgeting capital expenditures of approximately
$1.1 billion in 2008. Macy's, Inc. expects to continue to buy back its
stock in 2008, depending on market conditions.
Division Principal Changes
As part of the transition process, Jeffrey Gennette, currently
chairman and chief executive officer of Macy's Northwest, will
relocate to San Francisco as chairman and chief executive officer of
Macy's West. He will succeed Robert L. Mettler, who has agreed to
postpone his planned July retirement and will remain with Macy's, Inc.
as president for special projects, reporting to Vice Chair Susan D.
Kronick. In this position, Mettler will focus initially on strategic
development of the company's cosmetics business.
Gennette will lead the Macy's West principal team that will
continue to include Daniel H. Edelman, president and chief operating
officer, and Rudolph J. Borneo, vice chairman and director of stores.
The new Macy's West division will incorporate 257 Macy's stores in 13
western states and Guam, with 2007 sales of approximately $7.0
billion.
Robert B. Harrison, currently Macy's Northwest president and chief
operating officer, will remain in Seattle to supervise the transition
and later will be reassigned to a senior position within the company.
At Macy's North, Frank J. Guzzetta, chairman and chief executive
officer, and Robert M. Soroka, president and chief operating officer,
both will retire as they had previously planned in spring 2008. Amy
Hanson, Macy's North vice chairman and director of stores, will remain
in Minneapolis to supervise the transition and later will be
reassigned to a senior position within the company.
Following the consolidation, Macy's East will continue to be led
by Ronald Klein, chairman and chief executive officer, and Mark S.
Cosby, president and chief operating officer. The consolidated Macy's
East division will incorporate 252 stores in 20 eastern and midwestern
states and Washington, D.C. with 2007 sales of approximately $9.0
billion.
William P. McNamara, Macy's Midwest chairman and chief executive
officer, will remain with the company in a new role leading
development of future Macy's reinvent strategies, reporting to
Lundgren. Brian L. Keck, president and chief operating officer of
Macy's Midwest, will remain in St. Louis to assist with the
transition.
Following the consolidation, Macy's Central will continue to be
led by Edwin J. Holman, chairman and chief executive officer, Andrew
P. Pickman, president and chief merchandising officer, and Michael G.
Krauter, vice chairman and director of stores. The consolidated Macy's
Central division will incorporate 240 stores in 18 states with 2007
sales of approximately $5.3 billion.
All retail division chairmen, including Klein, Holman and
Gennette, will continue to report to Kronick.
"Macy's, Inc. has benefited from exceptional leadership at the
divisional level, and this will continue to be the case going forward
across the company. Bob Mettler has been an exceptional and highly
effective leader at Macy's West, and we are fortunate that he will
remain with the company to provide additional leadership and strategy
development, initially in the cosmetics business. Frank Guzzetta, Bob
Soroka, Bill McNamara and Brian Keck are outstanding retailers who
have been instrumental in the transition of the Macy's North and
Macy's Midwest organizations after the acquisition of The May
Department Stores Company in 2005," Lundgren said.
Gennette, 46, has been chairman and chief executive officer of
Macy's Northwest since February 2006. For the previous two years, he
served at Macy's Central in Atlanta as executive vice president and
director of stores. Gennette was senior vice president/general
merchandise manager for men's and children's at Macy's West in San
Francisco from May 2001 to March 2004, and before that vice
president/division merchandise manager for men's collections at Macy's
West. Gennette joined Macy's West in 1983 as an executive trainee and
held various merchant and store management positions in that division.
During his career, Gennette also has served as a store manager for FAO
Schwarz and regional vice president for Broadway Stores.
Guzzetta, 62, became chairman and chief executive officer of
Macy's North in February 2006 after serving as president of Marshall
Field's since January 2005. Previously, he was president and chief
executive officer of May Company's Hecht's/Strawbridge's division
since 2000. He joined Hecht's in 1988 as a divisional vice president
and divisional merchandise manager before being promoted to senior
vice president and general merchandise manager and, later, executive
vice president of merchandising. Prior to joining May, he worked in
retailing for 11 years at Woodward & Lothrop.
Hanson, 49, joined Macy's North as vice chairman in July 2006. A
25-year Macy's, Inc. veteran, she joined the company in 1983 and held
positions of increasing responsibility at the Corporate Office and at
The FACS Group (now Macy's Credit and Customer Services). She joined
FACS in 1991 as group manager for planning and receivables before
being promoted to senior vice president in 1997 and president of
credit services in 2000. She was named president of FACS in 2002.
Harrison, 44, has been president and chief operating officer of
Macy's Northwest since February 2006. Previously, he was chairman of
Robinsons-May in Los Angeles since October 2004, having previously
served as that division's senior vice president and chief financial
officer since June 2002, as well as the senior vice president for
finance of the Meier & Frank division before it was merged with
Robinsons-May. Harrison began his career at May Company's Kaufmann's
division in 1986 as an accounting analyst and served in positions of
increasing responsibility before becoming vice president and
controller of Kaufmann's.
Keck, 55, was named president and chief operating officer of
Macy's Midwest in October 2005. He began his career with May Company
in 1986 as divisional vice president and director of recruitment and
placement for Famous-Barr in St. Louis. In 1987, he was named senior
vice president of human resources at May Centers, May's former
shopping center development division. In 1989, he was named senior
vice president for human resources for the Meier & Frank division in
Portland, Ore., and was named to a similar position in 1992 at
Filene's in Boston. In 1997, Keck was named chairman of the Meier &
Frank division, and in 2000 was selected to head the corporation's
human resources organization.
McNamara, 57, was named chairman and chief executive officer of
Macy's Midwest in October 2005. He began his retailing career in 1972
as an executive trainee at Filene's in Boston. He served in a variety
of executive and buying positions until 1986, when he was named senior
vice president and general merchandise manager at Filene's. In 1995,
McNamara was named senior vice president and general merchandising
manager at May Merchandising Company in St. Louis. In 1997, McNamara
was named president and chief executive officer of Famous-Barr, and in
1998 became president of May Merchandising Company. He became the
corporation's vice chairman in 2000.
Mettler, 67, was named chairman and chief executive officer of
Macy's West in June 2002 after having served as the division's
president and chief operating officer since 2000. Mettler began his
retail career in 1962 as an executive trainee at Jordan Marsh in
Boston, then a division of Allied Stores Corporation. Mettler stayed
with Allied until 1986, having risen through the merchandising ranks
at Jordan Marsh before being named president and chief executive
officer of Joske's San Antonio in 1980, and chief executive officer of
Joske's of Texas in 1984. Two years later, he joined the May Company
as president and chief executive officer of its L.S.Ayres division
before being named to that post at Robinson's in California in 1987.
He joined Sears in 1993 as president for apparel and home fashions,
and rose to become president of merchandising for full-line Sears
stores.
Soroka, 56, became president and chief operating officer of Macy's
North in February 2006 after serving as chairman of Marshall Field's
since October 2004. Previously, he was chairman of Robinsons-May in
Los Angeles and, before that, the division's senior vice
president/chief financial officer. Soroka joined May in 1970 at
O'Neil's, May Company's former department store division headquartered
in Akron, Ohio. From 1983 through 1990 he held increasingly
responsible financial and credit positions at three additional May
department store divisions.
Macy's, Inc., with corporate offices in Cincinnati and New York,
is one of the nation's premier retailers, with fiscal 2007 sales of
$26.3 billion. The company operates more than 850 department stores in
45 states, the District of Columbia, Guam and Puerto Rico under the
names of Macy's and Bloomingdale's. The company also operates
macys.com, bloomingdales.com and Bloomingdale's By Mail. Prior to June
1, 2007, Macy's, Inc. was known as Federated Department Stores, Inc.
All statements in this press release that are not statements of
historical fact are forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements
are based upon the current beliefs and expectations of Macy's
management and are subject to significant risks and uncertainties.
Actual results could differ materially from those expressed in or
implied by the forward-looking statements contained in this release
because of a variety of factors, including conditions to, or changes
in the timing of, proposed transactions, prevailing interest rates,
competitive pressures from specialty stores, general merchandise
stores, manufacturers' outlets, off-price and discount stores, new and
established forms of home shopping (including the Internet, mail-order
catalogs and television) and general consumer spending levels,
including the impact of the availability and level of consumer debt,
the effect of weather and other factors identified in documents filed
by the company with the Securities and Exchange Commission.
(NOTE: Additional information on Macy's, Inc., including past news
releases, is available at www.macysinc.com/pressroom)
Macy's, Inc.
Media - Jim Sluzewski, 513-579-7764
Investor - Susan Robinson, 513-579-7780
Copyright Business Wire 2008
