Macy's (NYSE: M) is laying off 2,500 employees and closing five stores as part of a major reorganization that will generate savings of about $100 million annually, the company said Wednesday. Investors responded well to the announcement, and Macy's stock surged at one point more than 6 percent in after-hours trading Wednesday.
In addition to cutting its workforce and store count, Macy's, which also operates the high-end Bloomingdale's chain, shared good news concernig holiday sales performance. Sales at stores open for at least a year and online at macys.com and bloomingdales.com grew 3.6 percent in November and December over the same period in 2012. Macy's, forecast a profit of $4.40 to $4.50 per share for next fiscal year, while analysts were only expecting $3.87. Sales at stores open at least a year will rise 2.3 percent to 2.5 percent in the fourth quarter, slightly lower than analysts' estimates of 2.7 percent, on average. The retailer plans to report full fourth-quarter results Feb. 25.
"We have identified some specific areas where we can improve our efficiency without compromising our effectiveness in serving the evolving needs of our customers," Macy's CEO Terry Lundgren said in a press release.
The five stores that are set to close include Fiesta Mall, Mesa, Ariz.; Metcalf South Shopping Center, Overland Park, Kan.; Jamestown Mall, Florissant, Mo.; Medley Centre, Irondequoit, N.Y.; and Fashion Place Mall, Murray, Utah. In addition to shuttering stores, Macy's says it is also shifting merchandising responsibilities for "soft home categories" like sheets and towels from the district level to the regional and national level. Macy's says that these products change less often than clothing and accessories, thus, are less subject to local tastes.
In terms of job losses, the cost reductions entail combining its Midwest and North regions, which will eliminate merchandise planning and store positions as well as central office and administrative jobs. Macy's said that laid-off employees would be eligible for severance, and that with positions being added in other parts of the company, including its online operations arm, its work force would remain at about 175,000 people.
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