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Macy’s to Cut Jobs, Focus on Supply Chain in Restructuring Initiative

Macy’s Inc. said Tuesday that as part of its comprehensive, multi-year program focused on growing its profitability rate, the initial step of its productivity plan calls for a reduction in the positions from within its upper management structure in order to better invest in areas such as inventory planning and supply chain efficiencies.

The retailer said the step will increase the speed of decision making, reduce costs and respond to changing customer expectations. This step is expected to generate annual savings of $100 million for the company. The disclosure of its multi-year profitability plan was made on the same day the retailer posted fourth-quarter results.

In a Nutshell: Macy’s said its restructuring plan would help it put additional resources to improving supply chain efficiency, innovating and enhancing inventory management and building a larger and healthier customer base. These three areas are expected to fuel productivity over the next three to five years, and “contribute significantly to profitable growth,” the company said. The initial step is part of its North Star strategy, which Macy’s said includes initiatives to improve margin through enhanced inventory planning and operations, supply chain efficiencies, pricing optimization, improved private brand sourcing and customer acquisition and retention strategies.

Sales: Net sales for fourth quarter ended Feb. 2 fell 2.5 percent to $8.46 billion, from $8.67 billion. Comparable-store sales rose 2 percent in the quarter. Jeff Gennette, Macy’s chairman and chief executive officer, said the trajectory of the company and its initiatives gained traction in the back half of the year and that the quarter was another one of “double-digit growth in digital” for the company. He also said Macy’s saw continued improvement in its brick-and-mortar trends with its Growth50 stores strategy outperforming the rest of its fleet. Highlights of the initiatives for the year included improved benefits to its loyalty program, opening the Backstage off-price business in more than 120 new locations within Macy’s stores, expanding its store pick-up program, expanding the vendor direct program on and implementing the Growth50 investment model to upgrade 50 Macy’s stores.

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Looking ahead, Macy’s will add 100 more stores to its Growth50 plan and add Backstage to 45 more Macy’s stores. It will also invest in key destination businesses, such as dressed, men’s tailored, women’s footwear and beauty.

Earnings: Net income was nearly cut in half to $740 million, or $2.37 a diluted share, from $1.35 billion, or $4.38, a year ago. On an adjusted basis, excluding certain charges, net income was down 3 percent in the quarter to $850 million from $876 million a year ago, and diluted earnings per share was $2.73 versus $2.85. Wall Street was expecting adjusted EPS of $2.53 on sales of $8.45 billion. For fiscal year 2019, the company expects comps at flat to up 1 percent, net sales guided to flat versus a year ago and diluted EPS at between $3.05 to $3.25.

CEO’s Take: “Macy’s is heading into 2019 a stronger business than we were a year ago-with healthier stores, a growing e-commerce business and a mobile experience that is resonating with our customers,” Gennette said. “We are executing a balanced investment strategy that supports all three of these components, with investment directed towards areas we know have the highest returns.”