English: Macy’s Department Store in New York City. (Photo credit: Wikipedia)
There’s a saying on Wall Street
that bad news is actually good news for the market. Wednesday afternoon, Macy’s M +7.62%
proved to be the epitome of this mantra, watching its stock surge more than 6% in after-hours trading on the news that it is slashing 2,500 jobs.
Macy’s announced Wednesday afternoon that in an effort to achieve cost savings of $100 million per year starting this year, it is introducing a number of cost savings initiatives. Among the cost reduction strategies are store closings, organizational changes and the laying of off 2,500 employees.
“The actions being announced today reinforce our focus on continuous improvement in our M.O.M. strategies (My Macy’s localization, Omnichannel integration and Magic Selling customer engagement) and will help us to maximize the impact of the exceptional talent we enjoy at every level of our organization,” Macy’s chairman, president and CEO Terry Lundgren said in a statement Wednesday afternoon.
The retailer said that after the layoffs, its workforce is expected to remain at a level of approximately 175,000 associates.
The five Macy’s stores that will close are from the following locations: Fiesta Mall in Mesa, Arizona; Metcalf South Shopping Center in Overland Park, Kansas; Jamestown Mall in Florissant, Missouri; Medley Centre in Irondequoit, New York; Fashion Place Mall in Murray, Utah. In addition to the stores closing, Macy’s Midwest Region and North Region are, for organizational purposes, being combined into one North Central Region, reducing the number of organizational regions from eight to seven.
The news comes hand-in-hand with Macy’s release of its November/December comparable store sales report, in which the retailer reported that comparable store sales increased 3.6% in the combined months of November and December; including comparable sales from licensed third parties, sales for the period increased 4.3% compared to the same period in 2012.
Calling the results a success, CEO Lundgren said in a statement that “even in a questionable macroeconomic environment with challenging weather in multiple states, the positive response from our customers during the holiday season is yet another vote of confidence that our well-established strategies continue to work for us.”
Macy’s narrowed its guidance for comparable sales growth in the second half of 2013 to a range of 2.8% to 2.9%, down from its previous guidance of 2.5% to 4% growth. The retailers said it is maintaining its full-year 2013 earnings guidance in the range of $3.80 to $3.90 per diluted share, excluding charges related to Wednesday’s cost reduction announcement. It is projecting that its full year 2014 earnings will fall in the range of $4.40 to $4.50 per share. Macy’s is scheduled to report its fourth quarter earnings results on February 25, 2014.
This relatively rosy news from Macy’s is a contrast to JC Penney JCP +3.81%
, which earlier on Wednesday had virtually nothing
to say about its holiday season performance, releasing a two-paragraph statement that said the company was “pleased” and shoppers “responded well” to its offerings. Shares of JC Penney tanked 10% following the tight-lipped statement.
Shares of Macy’s, meanwhile, finished the day 0.65% down but surged more than 6% in after-hours trading. The retailer closed 2013 with a 39.4% return