Big moves at Macy’s prep chain for 2014

Macy’s rocked the retail world late Wednesday announcing record holiday sales while simultaneously cutting 2,500 jobs and detailing plans to close five stores.

The nation’s leading department store retailer late Wednesday issued two separate, oddly juxtaposed announcements; one heralding a record holiday season and confirming a strong profit performance and the other detailing a series of cost reduction and organizational changes that will save the company $100 million, but cost 2,500 people their jobs and result in the company taking a charge of between $120 and $135 million.

In explaining the restructuring and cost reduction moves, Macy’s chairman, president and CEO Terry Lundgren said, “our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s, Inc. We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope.”

Lundgren said the success of those strategies, evident in the company’s holiday performance, allowed it to identify areas where it can improve efficiency without compromising effectiveness in serving the evolving needs of our customers. Among the changes, Macy’s said it would combine its Midwest and Northern regions to create a new north central region, reducing its number of regions to seven from eight and number of districts to 60 from 69. In addition, the retailer’s merchandise planning organization and store level organizations will see positions eliminated. Gone is the role of district planner for the soft home category while the stores will see some positions combined or reduced in a manner that is said to “improve productivity and efficiency while also fostering high standards for customer engagement and service.”

While the changes will result in 2,500 employees being laid off, the company said its total workforce will remain stable at around 175,000 people due to additions in other areas. A portion of the lost jobs will be absorbed by the planned opening of eight new Macy’s and Bloomingdale’s stores offset by the closure of five stores.

“Our stores remain a very important component of our omnichannel strategy for both the Macy’s and Bloomingdale’s brands. We continue to maintain a very strong nationwide network of stores through an ongoing process of selectively adding new locations while also trimming those that no longer meet our performance requirements or where our leases were not renewed,” Lundgren said.

New Macy’s stores planned to open in 2014 through 2016 will be located in Sarasota, FL., Las Vegas, The Bronx, Puerto Rico and Miami while new Bloomingdale’s will be located in Palo Alto, CA., Honolulu and Miami. Stores slated for closure are stores located in Mesa, AZ., Overland Park, KS., Florissant, MO., Irondequoit, NY and Murray UT.

The series of moves were announced as Macy’s reported an enviable 4.3% same store sales increase for the November and December time frame and confirmed a full year profit forecast in the range of $3.80 to $3.90 a share.

“The 2013 holiday season was successful for Macy’s and Bloomingdale’s as we offered fresh and distinctive merchandise, delivered great value to the customer and provided a robust omnichannel shopping experience which served our customers whenever, however and wherever they chose to shop and to buy,” Lundgren said. “Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us.”

Looking ahead, the company said it expects same store sales in 2014 to range between 2.5% and 3% with earnings per share in the range of $4.40 to $4.50.