No Miracle on 34th St. for Macy’s, Thousands of Jobs Being Slashed

If Macy’s, Inc. was hoping for a modern-day Miracle on 34th St. the holiday season, it didn’t get one.

Citing warm weather in the Northeast as a deterrent to comp sales, Macy’s announced that its comparable sales on an owned plus licensed basis declined by 4.7% and 5.2% on an owned basis in the months of November and December 2015 combined, compared with the same period last year.

Terry J. Lundgren, Macy’s, Inc. chairman and chief executive officer, said about 80% of the company’s year-over-year declines in comparable sales can be attributed to shortfalls in cold-weather goods. He also blamed lower spending by international tourists for the shortfall.

And as a result, Macy’s also announced a major restructuring, which means thousands of jobs will be slashed, and its St. Louis credit and call center will close.

“In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations,” Lundgren said. “Moreover, we believe we can operate more effectively with an organization that is flatter and more agile so we can pursue growth and regain market share in our core Macy’s and Bloomingdale’s omnichannel businesses faster and with more intensity.”

However, Macy’s is intrigued by a very strong performance in our digital business, with continued double-digit increases in online sales. In November and December, the company filled nearly 17 million online orders at macys.com and bloomingdales.com, an increase of about 25% over last year, based on significant new fulfillment capacity, site functionality and aggressive digital marketing.

“This validates the strength of our omnichannel strategy and related investments which we made over the past decade and will continue into the future,” Lundgren said.

Here’s a look at the cuts Macy’s is planning as part of its latest restructuring:

  • Consolidating the grouping of existing Macy’s stores into five regions and 47 local districts (down from the current structure of seven regions and 58 local districts), as well as other field support functions. This reflects a smaller portfolio of stores and new technologies and techniques for managing the store business and tailoring assortments to local customer preferences.
  • Adjusting staffing levels at each Macy’s and Bloomingdale’s store in line with current sales volume to increase productivity and improve efficiency. An average of three to four positions will be affected in each of Macy’s and Bloomingdale’s approximately 770 going-forward stores (out of an average workforce of approximately 150 associates in each store), for a total of about 3,000 affected associates nationwide. Roughly 50% of affected store associates are expected to be placed in other positions.
  • Implementing a voluntary separation opportunity for about 165 senior executives in Macy’s and Bloomingdale’s central stores, office and support functions who meet certain age and service requirements and chose to leave the company beginning in spring 2016. Approximately 35% of these executive positions will not be replaced.
  • Reducing an additional 600 positions in back-office organizations by eliminating tasks, simplifying processes and combining positions, with about 150 of these associates reassigned to other positions.
  • Consolidating the four existing Macy’s, Inc. credit and customer services center facilities into three. The call center in St. Louis will be closed in spring 2016, affecting approximately 750 employees. Work currently performed in St. Louis will be divided among existing credit and customer services centers in Tempe, AZ, Clearwater, FL, and Mason, OH, where a total of about 640 positions will be added.

As previously announced, Macy’s also announced which of the 40 locations it would close (see list here), including four it closed in the final three quarters of 2015. Combined, those stores employed 3,176 people.

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