Macy's undergoes significant restructuring

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Macy's Inc. is undergoing a significant restructuring designed to prepare the company for growth once the economy recovers. The series of moves including a net reduction of approximately 7,000 positions, reorganizing the back end of the business into a single operating structure and expanding the “My Macy's” local store initiative that was launched last year.

“In the short- and long-term, the action being announced today will make us a more lean and efficient company and a stronger company,” said Terry Lundgren, chairman, president and CEO of Macy's Inc., in a statement.

The moves are expected to reduce previously planned expenses by approximately $400 million per year beginning in 2010 and $250 million this year.

While the reductions represent 4% of the company's total current workforce, the toll is much heavier at the higher levels, with nearly 40% of executive positions being eliminated as Macy's embarks on a major restructuring that includes eliminating its division structure.

Until now, Macy's Central, Macy's Florida, Macy's West and Macy's East each handled buying, merchandise planning, stores, marketing and corporate functions like human resources, logistics and information technology individually. Going forward, however, Macy's Inc. will have one organization for each of these functions. Macy's corporate marketing will be integrated into the new unified marketing organization.

The goal is to streamline decision-making, strengthen and simplify relations with vendor partners and eliminate duplication in functions such as buying and marketing. The new organization will be in place in the second quarter of 2009. Central buying, merchandise planning, stores senior management and marketing functions will be located primarily in New York. Corporate-related business will be located primarily in Cincinnati. Macy's workforce in these two cities is expected to increase nominally to support the nationwide Macy's business.

The elimination of existing divisional central offices will affect approximately 1,400 positions.

Macy's will also roll out the My Macy's initiative nationwide by grouping all stores into 69 geographic districts that will average 10 to 12 stores each. Twenty of these districts were created as My Macy's pilot programs last year. The new structure is intended to help Macy's better serve specific consumer needs and leverage knowledge of customer segments to drive same-store sales, profitability and customer loyalty.

Of the company's 15 best-performing geographic markets in December, 13 were My Macy's pilot districts.

“We are moving quickly and decisively to expand this model to all of our markets so we can pursue sales-driving opportunities as we position ourselves to capture share in every local market,” said Lundgren.

In each of the 49 new districts, an average of 23 new positions will be created at the local level to help central planning and buying executives understand and act on the needs of local customers.

The 69 districts will be grouped into eight regions that will be based in the Chicago, Houston, Miami, Los Angeles, New York, Pittsburgh, San Francisco and Washington, DC areas. Each region will include special events and marketing public relations staffs.

The company has also begun the process of reducing approximately 5,100 positions nationwide from its stores, distribution centers and offices so the size of the company's organization is aligned with current consumer demand. In addition, merit salary increases for executives are being eliminated and the company will reduce the level of its match to employee 401(k) plans.

A new executive management team is also in place. Timothy A. Adams, currently chairman and CEO of Macy's Home Store, become chief private brand officer; Thomas L. Cole, currently vice chair of Macy's Inc., becomes chief administrative officer; Mark S. Cosby, currently president and COO of Macy's East, becomes president-stores; Jeffrey Gennette, currently chairman and CEO of Macy's West, becomes chief merchandising officer; and Julie Greiner, currently chairman and CEO of Macy's Florida, becomes chief merchandise planning officer. Peter Sachse remains the company's CMO.

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