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Shakeup at Macy's

Laying out corporate structural changes and moving to localize some merchandising functions, Macy's last week made bold assertions that it will improve sales and earnings in the year ahead by "engaging our customer more effectively in every store, as well as reducing total costs," according to chairman, president and ceo Terry Lundgren.

Macy's will consolidate its Minneapolis-based Macy's North organization into New York-based Macy's East; its St. Louis-based Macy's Midwest group into Atlanta-based Macy's South; and its Seattle-based Macy's Northwest group into San Francisco-based Macy's West. The Atlanta-based division will be renamed Macy's Central.

The consolidation, expected to be completed in the second quarter, will affect some 2,550 positions. The 850-store retailer projects an SG&A savings of $100 million beginning in 2009, and about $60 million to be saved this year.

The company's Miami-based Macy's Florida and New-York based Bloomingdale's divisions are not affected by the announcement.

As part of the transition process, Jeffrey Gennette, currently chairman and ceo of Macy's Northwest, will relocate to San Francisco as chairman and ceo of Macy's West. He will succeed Robert Mettler, who has agreed to postpone his planned July retirement and will remain with Macy's as president for special projects, reporting to vice chair Susan Kronick.

Gennette will lead the Macy's West principal team that will continue to include Daniel Edelman, president and coo, and Rudolph Borneo, vice chairman and director of stores. The new Macy's West division will incorporate 257 Macy's stores in 13 western states and Guam, with 2007 sales of approximately $7.0 billion.

Robert Harrison, currently Macy's Northwest president and coo, will remain in Seattle to supervise the transition and later will be reassigned to a senior position within the company.

At Macy's North, Frank Guzzetta, chairman and ceo, and Robert Soroka, president and coo, both will retire as they had previously planned in spring 2008. Amy Hanson, Macy's North vice chairman and director of stores, will remain in Minneapolis to supervise the transition and later will be reassigned to a senior position within the company.

Following the consolidation, Macy's East will continue to be led by Ronald Klein, chairman and ceo, and Mark Cosby, president and coo. The consolidated Macy's East division will incorporate 252 stores in 20 eastern and Midwestern states and Washington, D.C. with 2007 sales of approximately $9.0 billion.

William McNamara, Macy's Midwest chairman and ceo, will remain with the company in a new role leading development of future Macy's reinvent strategies, reporting to Lundgren. Brian Keck, president and coo of Macy's Midwest, will remain in St. Louis to assist with the transition.

Following the consolidation, Macy's Central will continue to be led by Edwin Holman, chairman and ceo; Andrew Pickman, president and chief merchandising officer; and Michael Krauter, vice chairman and director of stores. The consolidated Macy's Central division will incorporate 240 stores in 18 states with 2007 sales of approximately $5.3 billion.

All retail division chairmen, including Klein, Holman and Gennette, will continue to report to Kronick.

Meanwhile, some regional and district store operating structure will be reorganized, and up to 250 new positions will be created, to "roughly double the number of management positions in the field in these markets."

All current store locations will remain in place.

"We believe the right answer is to reallocate our resources to place more emphasis and talent at the local market level to differentiate Macy's stores, serve customers and drive business," said Lundgren. "In essence, we plan to drive sales growth by improving our knowledge at the local level and then acting quickly on that knowledge."

"In addition, we believe our new strategies will speed up decision making and simplify the process of working with our vendors," Lundgren said.

Macy's reported total sales of $1.275 billion for the four weeks ended Feb. 2, a 28.4% drop from $1.782 billion in the five weeks ended Feb. 3, 2007.

The 28.4% shortfall was primarily attributable to one fewer week this fiscal month — but same-store sales fell 7.1%, which was well below the retailer's guidance of a comp drop of 4% to 6%.

For the 13-week fourth quarter of fiscal 2007, sales of $8.597 billion were down 6.1% from $9.159 billion in the 14-week quarter last year. Comps fell 2.0%, at the bottom of the guidance range.

The company's total sales for the 52 weeks of fiscal 2007 were $26.316 billion, down 2.4% from $26.970 billion in the 53-weeks fiscal 2006. Comps fell 1.3% for the year.

Macy's, Inc. is slated to report its fourth-quarter earnings on Tuesday, Feb. 26.

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