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Macy’s Plans to Cut 2,500 Jobs, Reduce Costs by $100 Million

Macy’s Inc. is looking to make 2014 a year of savings and has implemented a series of “focused cost reductions” to do so.

The retailer announced Wednesday that this year will bring several organizational changes including five store closures that are expected to result in 2,500 job cuts.

On the same day, Macy’s announced holiday sales results showing that comparable sales, including licensed departments for November and December combined, were up 4.3% over the same period last year. Comparable sales without considering licensed merchandise was a lower 3.6%.

“The 2013 holiday season was successful for Macy’s and Bloomingdale’s as we offered fresh and distinctive merchandise, delivered great value to the customer and provided a robust omnichannel shopping experience which served our customers whenever, however and wherever they chose to shop and to buy,” said Terry J. Lundgren, Macy’s chairman, president and chief executive officer. “Even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us,” he added.

But despite the positive performance, the new cost-cutting measures will be put in place to ensure sustained sales growth in the coming years, according to the retailer.

Lundgren said, “Our company has significantly increased sales and profitability over the past four years, and we have created a culture of growth at Macy’s, Inc. We began five years ago with a set of business strategies that were largely untested by a national retailer of our size and scope.” He added that, “As the success of these strategies has unfolded, we have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers.”

Those specific areas include operating cost reductions like: combining its Midwest Region with its North Region, creating one new North Central Region and bringing its region count down from eight to seven; taking its district count to 60 from the current 69 by consolidating nearby districts; combining and reducing certain positions for improved productivity and efficiency, plus “central office, administrative and back-of-the-house” trimming in terms of workforce and non-payroll expenses.

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While the changes will bring steep layoffs, Macy’s said it will be adding new positions in online operations, direct-to-consumer fulfillment and in the eight new stores slated to open between 2014 and 2016. The total workforce will still remain right around its current 175,000.

Macy’s will eliminate 730,000 square feet of retail space and 412 associates with the five store closings. The retailer will shutter stores in Mesa, AZ; Overland Park, KS; Florissant, MO; Irondequoit, NY and Murray, UT.

But the new Macy’s stores will add 845,000 square feet of retail space and another 407,000 with new Bloomingdale’s stores.

Once all of these changes have been made, Macy’s Inc. will operate 844 stores in 45 states, the District of Columbia, Puerto Rico and Guam.

The company said it expects this reorganization to save roughly $100 million per year. With the cost reductions, store closings and asset impairment charges, the company will book an estimated $120-$135 million of charges, of which $50 million to $55 million is expected to be non-cash, in Q4 2013.

Following the announcement of its cost-reducing plans, Macy’s stock jumped 7 percent in premarket trading Thursday.