Macy’s Restructure Rocks Shoe Industry

Macy’s Restructure Rocks Shoe Industry
Macy’s is consolidating in New York.

NEW YORK — Footwear players are still reeling after Macy’s big cost-cutting moves last week.

The department store chain announced plans to consolidate its four regional divisions into one organization, while slashing 7,000 jobs. The company will disband the Macy’s West, Central and Florida divisions and relocate select retained employees to centralized headquarters in New York and Cincinnati by May 1. Macy’s spokesman Jim Sluzewski told Footwear News Macy’s will soon begin “organizing” the national footwear buying team, but was unable to confirm who would make the cut.

Hours after the news was made public, Macy’s buyers from all regions arrived in New York for FFANY market week. Vendors said that each division was buying for fall as usual, but “stuck to the press release” and didn’t reveal who would be on board past April. A source close to the Macy’s West team said that staffers were told to prepare their resumes if they wanted to be considered for relocation to New York.

The announcement elicited strong reaction across the footwear industry.

“This is sad and difficult for all of us in the industry,” said Scott Silverstein, CEO of Nina Footwear. “A lot of excellent merchants are now in incredibly difficult positions. We’ve known them for years and consider them an integral part of our Nina team. It’s too early to understand the implications to our business.”

In a conference call with analysts, Macy’s CEO Terry Lundgren presented the streamlined Manhattan headquarters as a competitive advantage. “We are the only retailer that I know of that is based in New York City, and of course most vendors are based in New York. We have the unique ability to walk down the street and work with our vendors on a much more frequent basis than any of our competitors.”

But some observers are no doubt questioning if smaller brands will still be picked up by the retailer. “Will the centralized office allow the smaller, newer brands into the matrix?” wondered Sam Poser, an analyst at Sterne, Agee and Leach.

FFANY President Joe Moore also expressed concern. “The first thing to go with ‘bigness’ is creativity,” he said. And some brands could lose the relationships they’ve built with divisional buyers, he added. “They will have to start all over … and everybody’s going to be nervous about that.”

Macy’s Sluzewski said it’s too soon to tell if the consolidation will affect the retailer’s brand roster. “We are going to be looking to buy the very best footwear selection we can, but any of the specifics are just premature at this point,” he said.

On the conference call, Lundgren said the firm would be cutting budgets across all departments for an expected annual savings of $400 million; $250 million for the partial year 2009. In addition, the company will take the “My Macy’s” localized merchandising strategy nationwide. Initially piloted in May 2008, the strategy divides the country into eight regions and 69 districts, each with it’s own district-level executives. New York buyers will receive guidance from district planners, but will have complete control over all open-to-buy decisions.

While the changes at Macy’s may have some brands holding their breath, most will do whatever necessary to keep ties with America’s largest department store.

“Macy’s has been a great partner,” said Mark Jankowski, director of product development for Chinese Laundry. “It’s not going to be business as usual in any of our lives, but we’ll work with them to make this work for both of us.”

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