US Department Store Macy's Cuts 7,000 Jobs

The US department store chain Macy's is cutting 7,000 jobs in the latest sign of financial misery on the high street as cash-strapped shoppers steer clear of shops packed with luxury goods and designer brands.

The company is internationally known for its Bloomingdale's store in New York which is a popular haunt for tourists and for its flagship branch of Macy's in Manhattan's Herald Square which claims to be the biggest department store in the world.

The company warned that it faces a "very challenging environment" and said it expects like-for-like sales at its 840 sites across the US to fall by 6% to 8% this year.

By cutting 4% of its workforce, Macy's is hoping to save $400m annually. The firm slashed its dividend payout to shareholders from 13.25 cents to 5 cents, sending its shares down by 4% on the New York Stock Exchange.

"We just believe that this is a time when nothing should be considered a sacred cow," said chief executive Terry Lundgren.

Macy's is closing 11 stores and is cutting its capital expenditure by between $100m and $150m to around $450m. The firm said it was keeping shop-floor job cuts to a minimum, with most of the redundancies at the executive level in regional head offices.

The company is instituting a pay freeze and at senior levels, it intends to reduce perks such as company cars, in-store discounts, life insurance and financial counseling.

Macy's is merely the latest US retailer to suffer a dismal downturn in trade. Several nationwide retailers have gone into liquidation including an electronics chain, Circuit City, and a household linens firm, Linens 'N Things.

Those surviving in relatively good shape tend to be chains offering rock-bottom prices such as Wal-Mart, Target and CostCo.

Patricia Edwards, a retail analyst at Storehouse Partners, said Macy's had been unable to respond to demand for cut-price goods: "The retail environment has changed so much. They have not been competing on a value proposition and this is a value market."

Macy's shares have slumped by 69% in the last 12 months. Shares in fellow department store operators such as Sears and Saks fell sharply in sympathy today, as did stock in designer brands such as Polo Ralph Lauren which closed down 5.2%.