Macy’s new restructuring to cut senior jobs and save $100m annually

US’s largest department store chain seeking to reduce costs and improve profitability

Shoppers  outside the Macy’s store at Manhattan’s Herald Square in New York. Photograph: Getty Images

Shoppers outside the Macy’s store at Manhattan’s Herald Square in New York. Photograph: Getty Images

 

Macy’s, the largest US department store chain, said on Tuesday it would cut 100 senior management positions to reduce costs and improve profitability, and reported holiday same-store sales growth short of Wall Street’s expectations.

A multi-year programme will also help the Cincinnati-based company improve its supply chain and tightly control its inventory, it said.

The job cuts, at the vice-presidential level and higher, combined with its supply chain and inventory actions, are expected to yield annual savings of $100 million (€88 million), starting in the current fiscal year.

“The steps . . . will allow us to move faster, reduce costs and be more responsive to changing customer expectations,” chief executive Jeff Gennette said.

Last month, Macy’s tempered expectations for the holiday season by slashing its fiscal 2018 revenue and profit forecast on weak demand for women’s sportswear, seasonal nightware, fashion jewellery, fashion watches and cosmetics. Its shares plunged 18 per cent.

Department stores in recent quarters had shown signs they were finding ways to cope with declining mall traffic and tough competition from online seller Amazon.com , helped by a robust economy and strong consumer spending in 2018.

Strong market share

In 2019, Macy’s said it would invest in categories where the company already has strong market share such as dresses, fine jewellery, women’s shoes and beauty, as well as revamp 100 stores, up from the 50 stores it remodelled last year. It also plans to build out its off-price Backstage business to another 45 store locations.

Shares of the company were roughly flat at $24.27 in morning trading, after rising as much as 5 percent earlier.

Macy’s, which has closed more than 100 locations and cut thousands of jobs since 2015, reported a smaller-than-expected 0.7 per cent rise in holiday quarter same-store sales on Tuesday, below the company’s own expectations.

“Core EPS guidance came in a bit lighter than we were expecting, but no worse than buy-side fears,” said Gordon Haskett analyst Chuck Grom.

“Inventory levels are heavier than normal for Macy’s, but the company appears to have done a good job clearing through excess levels following a softer holiday period,” he said.

The company now forecasts adjusted profits for fiscal 2019 between $3.05 to $3.25 per share, below analysts estimates of $3.29. – Reuters