According to a report in Women's Wear Daily, Macy's is considering further downsizing from four to two divisions. Sources told the fashion trade paper that plans call for the consolidation of Macy's Florida in Miami and Macy's Central in Atlanta into the New York-based Macy's East and San Francisco-based Macy's West divisions.
WWD said the consolidation would "affect hundreds of employees, save the corporation millions of dollars, and take it one step closer to being totally centralized like most of its competition, including Kohl's Corp., J.C. Penney Co. Inc. and Sears Holdings Corp."
In February, Macy's announced plans to reduce its divisions from seven to four by eliminating Macy's North in Minneapolis, Macy's Midwest in St. Louis and Macy's Northwest in Seattle. That consolidation, which eliminated 2,550 jobs, was completed in the second quarter and is expected to reduce expenses by $100 million annually by the beginning of 2009.
At the time, Macy's said it would set up smaller regional offices in Chicago, Cincinnati, St. Louis and Seattle charged with tailoring Macy's stores to local tastes, an effort dubbed "My Macy's."
Although some analysts had questioned the effectiveness of the new localization effort, Macy's chairman and CEO Terry Lundgren said reacting quickly to regional tastes is key to strengthening sales.
"We'll ultimately be judged on our performance in each and every individual store," he told the Chicago Tribune at the time. "It's wonderful to have all these marketing opportunities with a national brand, but we have to be locally relevant."
News of a possible further consolidation comes as the department store operator reported a net loss of $44 million in the third quarter, and said it was cutting capital expenditures plans for 2009 almost in half to $550 million to $600 million from around $1 billion.
Sources told WWD that any new streamlining won't happen until next year. Typically, the trade paper said, consolidations affect back-office functions, such as payroll, accounts payable, security, personnel, advertising and credit. Although the cutbacks are dramatic, many employees get reassigned and those at the surviving divisional headquarters assume greater workloads.
"If Macy's does come out with a lousy Christmas, this consolidation is something they can show Wall Street and say that they haven't been sitting still in this difficult economy," said one source. "The hard part of all of this is telling people they're leaving. It's hard."
Discussion Questions: What are the pros and cons of Macy's moving more toward a centralized merchandising model? How will this impact localization efforts?