NEW YORK -- The cost-cutting continues at R.H. Macy & Co.
The company said Friday it would slash 700 jobs in its Macy's West division, which includes 31 Macy's and 20 Bullock's department stores.
The cuts are part of the bankrupt retailer's five-year business plan. They will affect various levels of management but not sales associates.
As reported, the company is negotiating with the developer of the Northridge Fashion Center in Los Angeles to rebuild the Bullock's store there. That unit was destroyed in the Jan. 17 earthquake. When the store is rebuilt, Macy's said it hopes to rehire many of its 250 employees. The Bullock's unit in Sherman Oaks was also severely damaged by the quake. Macy hopes to reopen it but did not say when. Meanwhile, the 700 people who are losing their jobs will be offered outplacement services and, in most cases, severance packages. Bullock's Northridge workers will be offered severance and health-care benefits according to seniority, plus counseling and outplacement services.
Michael Steinberg, chairman and chief executive officer of Macy's West, said the layoffs were not connected to the Los Angeles earthquake. He described business in California as "a mixed bag" with some stores rebounding and others still suffering in the tough economy.
"These staff reductions are a painful but necessary step in our efforts to remain competitive and return Macy's to profitability," he said. He added that at Macy's West, "There's still 17,000 people working."
Joseph Cicio, chairman and ceo of I. Magnin, said this wave of job cuts will not affect the specialty chain, which is a separate division of R.H. Macy. Magnin's was trimmed from 19 stores to 12 last year.
The Macy's West move is not thought to be a reaction to Federated Department Stores buying a chunk of Macy's debt at the beginning of the month or to the losses and rebuilding costs associated with the earthquake, said analysts.
Macy's is generally perceived to be progressing in its bankruptcy plans, with operating profits improving. Last month, the company said its operating net tripled for the first quarter ended Oct. 30, to $41.9 million, mainly as a result of cost cutting at corporate and store levels.The store has been closing unprofitable stores chainwide since it filed its Chapter 11 petition in January 1992. Many of those units were on the West Coast. Three Bullock's stores -- in downtown Los Angeles, Lakewood and La Mesa, Calif. -- closed last year.
On Friday, analysts said the moves were positive.
"I think the division needed streamlining badly, and in spite of anything else -- Federated, the earthquake -- we would have seen this happen," said Todd Slater, retail analyst with UBS Securities. "The division has a new operating chief who probably saw fit to clean house."
Slater said the Macy's stores on the West Coast are "holding their own" and have become more competitive, especially when compared to other retailers in the area.
"This is part of a much larger strategy," he added. "Macy's wants to streamline to bring these stores into the future profitably, whether they're sold or not."
Analyst Walter Loeb said, "Macy's correctly trimmed non-customer-related services. Steinberg has been able to cut costs -- which is an excellent move -- to help the company's longer-term growth and position it to do well once the economy improves in California." He said this is not a sign of Macy's getting ready to spin off divisions, or a reaction to Federated.
"It is facing the realities of today's times in California," he said.
Manufacturers did not seem too troubled about the moves.
Leonard Rabinowitz, chairman and ceo at Carole Little, said, "I know Michael Steinberg, and I trust his judgment. Our business with Macy's West has been great until the earthquake. Between store closures on the East Coast due to the weather and closures on the West Coast due to the quake, we probably lost one-third of our usual business for the week." A spokeswoman at Harkham Industries, which makes the Jonathan Martin and Hype collections, said, "We are going to continue doing business with Macy's West. We are worried, but everything has run smoothly up to this point. We ship about $200,000 worth of merchandise to them monthly and they pay us within 30 days."Andy Cohen, president of Esprit Apparel, said, "We have a great deal of confidence in Michael Steinberg. We feel assured these personnel changes are in the best interest of the business. Macy's has always been supportive of Esprit, so we continue to support them."
"We have had no problems with Macy's since it went into Chapter 11," said Jessica McClintock, owner of the dress firm bearing her name. "Their credit is OK, everything seems fine. I'm not surprised by the move. They are really tightening their belt, and I think it's good."
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