After a year of dramatic changes, Macy's (NYSE: M) has emerged as a slimmer entity focused exclusively on the department-store channel. Let me count the changes the company has completed over the past 18 months:
- Completed the integration of Federated Department Stores.
- Changed its name and stock ticker.
- Sold Lord & Taylor, Priscilla of Boston, and the bridal group consisting of David's Bridal and After Hours Formalwear.
Sales were also somewhat slimmer, with comparable-store numbers trending down 2% in the fourth quarter, adjusted for the extra week last year. Inventories ended the year in fine trim, down 5% versus the prior year, showing that management is taking a cautious stance as they head into 2008.
The company did manage to beef up earnings per share from continuing operations, which rose to $1.65 compared to $1.60 last year, excluding a host of unusual items related to the May Department Store acquisition and subsequent business dispositions. This was a pleasant surprise to analysts, who were only expecting $1.60.
Expect Macy's to present an even more svelte profile as it heads into 2008. A few weeks ago, the company announced a reorganization which will eliminate about 2,300 positions in divisional central offices, but will add back talent at the local level -- providing more autonomy to satisfy customer needs in individual markets. The new scheme is expected to generate partial-year savings of $60 million in 2008, growing to $100 million in 2009.
To round out the "slimming down" theme, even Macy's reporting calendar is getting a trim. Following a previous decision to discontinue quarterly earnings guidance, the company will now also discontinue monthly sales releases. The goal of this change is to focus management on longer-term goals (a sage decision).
Department-store competitors like J.C. Penney (NYSE: JCP), Dillard's (NYSE: DDS), Kohl's (NYSE: KSS), and Nordstrom (NYSE: JWN) should certainly take notice. After 18 months of digesting a major acquisition, Macy's has transformed itself into a lean, focused entity. While comp sales growth may be challenging this next year, it looks like the company has room to run.
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