Macy's to cut jobs, shut stores amid weak holiday sales

Reuters News
Posted: Jan 06, 2016 4:15 PM

(Reuters) - Macy's Inc <M.N> said it would cut jobs and consolidate operations after reporting disappointing holiday sales, highlighting the department store chain's struggles to attract customers.

The company's shares rose 4.6 percent to $37.80 in after-market trading on Wednesday.

Warm weather, low spending by tourists and a pileup of unsold inventory prompted Macy's to cut its full-year forecast in November, raising wide concerns about the retail sector's financial health.

Consumers have shied away from buying discretionary items such as clothes and cosmetics, while spending more on electronics, cars, home goods and travel.

Also, Inc <AMZN.O> has revolutionized shopping habits, conditioning shoppers to expect deeper discounts than what brick-and-mortar retailers can afford.

"Macy's doesn't seem to have a unique spot in consumers' minds… like why would you go to Macy's?" said Lisa Haddock, marketing lecturer at San Diego State University.

Macy's said on Wednesday it expects to generate about $400 million in savings, beginning this year.

The company also cut its full-year 2015 earnings forecast to $3.85-$3.90 per share, excluding charges associated with the cost-savings program, from $4.20 to $4.30 per share.

Macy's said it expects a 2.7 percent drop in same-store sales for the year ending January, bigger than the 1.8 percent-2.2 percent decline it previously forecast.

The company said same-store sales on an owned basis declined 5.2 percent in the November-December holiday period due to warm weather and a strong dollar.

"In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations," Chief Executive Terry Lundgren said in a statement.

About 3,000 employees will be affected, with about 50 percent expected to be placed in other positions, the company said.

Macy's will also cut an additional 600 positions in back-office operations. The company will shut its St. Louis call center in spring 2016, affecting about 750 employees.

Macy's will implement a voluntary separation program for about 165 senior executives at Macy's and Bloomingdale's.

The company said it would shut 36 stores in early spring 2016. It closed 4 stores in 2015.

Macy's said it would record about $200 million in charges related to the cost-savings program.

(Reporting by Yashaswini Swamynathan and Abhijith G in Bengaluru; Editing by Sriraj Kalluvila)