Last week, Macy's revealed
plans to consolidate its four divisions - East, Central, West and
Florida - into a single organization for the first time in its 150-year
history. The plan also involves expanding its My Macy's localized-buying
strategy to 69 markets.
The move to consolidate its divisions "seemed inevitable" given that its many nameplates from the May Company acquisition had been steadily eliminated to establish Macy's as a national chain. It also puts the retailer on par with competitors such as Target, Kohl's and J.C. Penney that have long operated centrally.
To assure that stores are being merchandised and marketed to regional tastes, My Macy's, a program tested in 20 markets last year, is being rolled out. My Macy's will have 69 district offices, each covering 10 to 12 stores. An average of 23 merchandising and planning associates will help the central planning and buying organization to understand local-customer needs. In the past, Macy's teams covered about two dozen stores each.
Terry Lundgren, chairman, chief executive and president, told Women's Wear Daily that "the beauty of this new strategy is that we now have the centralized national organization but with local execution."
Mr. Lundgren also said he feels "fortunate" that Macy's had recently "outperformed our competitors" and the My Macy's initiative is already bearing fruit and poised to expand on a national basis. Of its top 15 best-performing geographic markets in December, 13 were My Macy's pilot districts.
The centralization process involves closing the Macy's West, Macy's Florida and Macy's Central divisions, based in San Francisco, Miami and Atlanta. All buying will be done in New York. Last year, seven divisions were downsized to four.
"With our new structure, Macy's now will have one unified buying organization, one unified merchandise planning organization, one unified stores organization, one unified marketing organization and one unified organization for each corporate function such as finance, logistics, information technology and human resources -- instead of four of each operating divisionally," Mr. Lundgren said. "By reducing duplication, we will be able to react faster to market trends, simplify our relationship with vendors and ensure that our expense dollars are devoted to activities that will drive the business most effectively."
The centralization is just part of a massive restructuring program that will eliminate 7,000 jobs, or 4 percent of its workforce. Other actions:
- Eliminating an average of five to six positions per store;
- Reducing its quarterly dividend to 5 cents a share from 13.25 cents;
- Further reducing capital expenditures to $450 million from between $550 million to $600 million previously and an original 2009 budget of $1 billion;
- Eliminating merit raises this spring and reducing matching employee 401(k) contributions.
Discussion Questions: Do you think Macy's move to consolidate its regional divisions will help its competitive position? What's the likelihood that the rollout of its My Macy's program does as good a job in tailoring regional buys and marketing to local tastes?