(Adds details from call, analyst comment, background)
By Aarthi Sivaraman
NEW YORK Feb 2 Macy's Inc (M.N) said on Monday
it would slash about 7,000 jobs and cut its quarterly dividend
as it forecast earnings for fiscal 2009 that fell far below
Wall Street expectations, sending its shares down 4 percent.
The department store operator said it took the steps to
counter what it expects will be a very tough retail market this
year, and that it would plan conservatively despite efforts by
the U.S. government to build an economic stimulus package.
Macy's expects these initiatives, which also include
integrating its divisions into one unit, to reduce its
previously planned expenses by about $400 million per year
starting in 2010, and $250 million in part of 2009.
"We just believe that this is a time when nothing should be
considered a sacred cow," Chief Executive Terry Lundgren said
in a conference call following the announcement.
On a pretax basis, Macy's expects costs of about $400
million in cash, mostly in fiscal 2009, tied to the steps.
Its Bloomingdale's stores will not be affected by these
initiatives, Macy's said.
In 2008, retailers saw their worst holiday sales in almost
four decades as recession-hit shoppers clamped down on spending
or hunted for deep discounts.
For Macy's to win consumers over in the recession, it would
have to be more promotional, said Patricia Edwards, a retail
analyst with Storehouse Partners.
"The retail environment has changed so much. They have not
been competing on a value proposition and this is a value
market," she said.
The job cuts announced on Monday are about 4 percent of the
company's workforce and should mostly be completed by May 1,
Lundgren said. Macy's also cut its quarterly dividend to 5
cents a share from 13.25 cents.
The company said it expected to earn 40 cents to 55 cents a
share, excluding restructuring costs, for fiscal 2009, below
the average analyst view of 79 cents per share, according to
Reuters Estimates. Same-store sales are expected to decline
between 6 percent and 8 percent, Macy's said.
The outlook assumes a steeper decline in the spring than in
the fall of the year, CFO Karen Hoguet said during the call.
Its 2009 outlook looked "appropriately conservative,"
analyst Liz Dunn of Thomas Weisel Partners wrote, adding the
cost savings could add another 15 cents per share to Macy's
Macy's also cut its 2009 capital expenditure budget to $450
million from a prior view of $550 million to $600 million.
The company said it would build on its store localization
initiative, originally announced nearly a year ago to boost
sales and cut costs, to focus on each local market's sales and
According to that plan, it will group its stores into 69
geographic areas with an average of 10 to 12 stores in each
Macy's will integrate all its functions into a single unit,
with its central buying, merchandise planning and senior store
management and marketing units to be located primarily in New
York. Its corporate affairs office will remain in Cincinnati.
The company said it would not raise salaries for executives
in spring 2009 and will also cut the amount of matching 401(k)
contributions in the year. It will recommend to the board to
reduce other benefits for executives including company cars,
life insurance and merchandise discounts.
Macy's shares closed down 36 cents to $8.59, above its
previous low of $7.50. Shares also slipped for some of its
major vendors, like Liz Claiborne LIZ.N, down 7.7 percent and
Jones Apparel JNY.N, which slid 3.5 percent.
(Additional reporting by Nicole Maestri; Editing by Lisa Von
Ahn, Gunna Dickson and Bernard Orr)