Recession hits Macy’s; Hawai’i Island store closing

Macy's, Inc. today announced the closing of 11 underperforming Macy's stores, including one store at the Mauna Lani Bay Hotel on the island of Hawai'i. The Big Island store has 3 employees.

The other 10 stores facing closure are located in Los Angeles, California; Colorado Springs and Westminster, Colorado; West Palm Beach, Florida; Indianapolis, Indiana; Brooklyn Center, Minnesota; St. Louis, Missouri; and Natrona Heights and West Mifflin, Pennsylvania.

The Cincinnati and New York-based department store retailer said the closings will cost roughly $65 million, $12 million of which will be cash, and up to 960 jobs. Most of these expenses will be booked in the fourth quarter of 2008, the company said.

"These closings are part of our normal-course process to prune underperforming locations each year in order to maintain a healthy portfolio of stores," said Terry J. Lundgren, chairman, president and chief executive officer of Macy's, Inc. "While new store growth has slowed in the current economy, our long-term strategy is to continue to selectively add new stores while closing those that are underperforming."

The company also said today that affected employees in good standing may be considered for open positions at other Macy's locations. Regular full-time and part-time associates who are laid off due to a store closing will be provided severance benefits and assistance in finding employment outside of the company.

The recession hits retail

Macy's retail sales have been affected by the harsh economic climate. The company today reported total sales of $4.397 billion for the five weeks ended Jan. 3, 2009, a decrease of 4.7 percent compared with total sales of $4.614 billion in the five weeks ended Jan. 5, 2008. On average, sales in individual stores were down 4.0 percent in December, down 7.5 percent over November and December.

By contrast, while traditional retail may be suffering, Internet commerce seems to show promise. The company reports that online sales on their websites were up by 39.1 percent in December, by 26.0 percent in the November-December period.

The company expects to end the fourth quarter with more than $1 billion in cash on hand and no borrowings against its $2 billion bank credit agreement.

"This has been the most challenging economic environment in memory, and I am proud of our organization for staying focused on delivering a compelling combination of value and fashion to customers who were shopping cautiously," Mr. Lundgren said.

Following this week's store closings, Macy's Inc. will operate 848 stores, including 808 Macy's and 40 Bloomingdale's.

Federated Department Stores, which became Macy's, Inc. in 2007, acquired Liberty House, Hawai'i's oldest and largest retail chain, in 2001. Liberty House was founded on Queen Street in Honolulu as Hackfeld's Dry Goods in 1849, but anti-German sentiment in 1918 led to a name change.