Macy’s consolidates, buying back debt
February 2, 2009,
Cincinnati – Macy’s Inc. is restructuring to a single national organization, even while it accelerates its “My Macy’s” local merchandising initiative; the $26 billion retailer also will cut its quarterly dividend from 13.25 cents to 5 cents per share, and is using cash to early-retire $950 million of senior debt notes.
Some of the new positions will be filled by Macy’s personnel whose present jobs will be phased out with the elimination of the San Francisco, Atlanta and Miami divisions.
“Bloomie’s and macys.com will not be significantly affected by this restructuring,” he noted.
“I think we’re going to make faster decisions,” said Lundgren of the new, unified structure. Responding to an analyst question, he emphasized, “Now that we have the My Macy’s initiative, that’s what has given me the confidence that we can be both national as well as locally responsive.”
In response to a question about how home merchandising – previously broken out as a separate division – might change, Lundgren said, “Now we’ll be able to tuck Home underneath our chief merchant, which will be Jeff Gennette.”
Amongst a slew of executive title changes and responsibility shifts announced today, Jeffrey Gennette becomes chief merchandising officer. He is currently chairman and ceo of Macy’s West.
Timothy Adams, the current chairman and ceo of Macy’s Home Store – which will phase out – becomes chief private brand officer.
Lundgren said the company believed the corporate reshaping – and the ability to “better gear our assortments to the local needs” will put Macy’s Inc. “in a better position to grow business when the economy improves.”
Karen Hoguet, evp and cfo, said the overhaul measures combined will save about $400 million on an annual basis starting in 2010. About $250 million in savings are seen for 2009.
Hoguet also stated the 2009 outlook: comps in the -6% to -8% range, “with the spring to have a deeper decline than the fall;” SG&A dollars down, but up as a percentage of sales; EPS, excluding restructuring-related expense, of 40-55 cents. She said capital expense will be reduced this year to $450 million.
Retiring the senior notes through its cash tender offer is expected to reduce interest expense – and to “eliminate any uncertainty about the company’s ability to handle near-term debt maturities,” Macy’s said. The cash tender offer to buy outstanding notes will expire next Tuesday, Feb. 10.
Answering a store-closing question, Lundgren and Hoguet said Macy’s is working on reducing its rent expense and is negotiating with landlords, but must act within the covenants of the leases and financial stipulations covering its 840 stores. The company stated, “Other than the previously announced closure of 11 Macy’s stores, all current Macy’s and Bloomingdale’s store locations will remain in place.”
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