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Macy's to shutter 11 store employing 1,450 people

By EVE TAHMINCIOGLU UPI Business Writer

NEW YORK -- R.H. Macy & Co. Monday took another step in its quest to return to profitability with the announcement it will close 11 stores in the next two to three months, leaving the fate of 1,450 workers up in the air.

Company spokesman Jim Fingeroth said Macy's management does not yet know how many of the workers it will offer employment to at other stores. He said some outlets slated for closure are not located near any other company operations.

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'The decision to close these stores was based on a variety of factors, including unsatisfactory profitability and productivity, a declining sales trend, a lack of growth potential in the market and, in most cases, the need for significant capital improvement,' said Macy's Co-Chairmen Mark Handler and Myron Ullman.

Stores to be closed include Macy's in New Haven, Conn., and Morristown, N.J.; Bullock's stores in Los Angeles, La Mesa and Lakewood, Calif.; and I. Magnin stores in Seattle and six California locales -- Los Angeles, Sherman Oaks, San Mateo, Santa Barbara and La Jolla.

The Macy's and Bulllock's stores have combined annual revenues of about $108 million and the I. Magnin units have approximately $66 million in sales. The retailer's total sales last year were about $6.5 billion.

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Macy's, which has been operating under Chapter 11 bankruptcy protection for more than a year, said Monday's move followed a five-year restructuring plan unveiled in 1992.

The program calls for Macy's to restructure its merchandising process by using new technology, cutting expenses and re-engineering its selling and customer-service operations.

Most industry observers were disappointed with Macy's five-year plan announced in November because it lacked dramatic measures to slim down operations and boost cash flow.

Thus, analysts breathed a cautious sigh of relief in light of Macy's decision to shutter 11 underperforming stores.

'This step is moving them in the right direction,' said Edward Johnson, retail analyst at Johnson Redbook Service. 'They've got to get their cash flow up, cut their cost and get rid of their losing operations.'

Macy's also said Monday it has met all of its bank convenants for the second quarter ended Jan. 30 and ended the period with $100 million more in cash than needed.

Handler and Ullman said the company is in the midst of implementing many initiatives, including the additional reductionsin corporate expenses, modification of the medical benefits program, restructuring of the store managment organization and a reworking of its promotional strategy.

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'We have received strong support for these activities from our associates, vendors, lenders and creditor groups,' the co-chairmen said.

At this point, the retailer employs 60,000 people and operates 114 Macy's and Bullock's department stores, as well as 19 I. Magnin stores. Macy's also runs 70 specialty stores under the Aeropostale and Charter Club names and 12 close-out units.

Many analysts have speculated that Macy's would sell off it I. Magnin business, which has not been profitable since Macy's acquired it in 1988.

The closures cut deepest into the I. Magnin chain, which has been struggling in the sluggish California economy.

'By focusing on its core stores -- San Francisco, Beverly Hills, San Diego and Phoenix -- and on other promising markets, I. Magnin will be better positioned for the future,' Handler and Ullman said. 'In addition to the store closing, the chain will reduce corporate efficiencies and install new information systems to improve productivity and profitability.'

Under the business plan, Macy's will install a new computer system and Monday announced it will invest $89 million in capital to put in point-of-sale terminals in all its deparment stores, beginning later this spring in Northern California and the Southeast.

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While the investment in technology will help Macy's profit margins by making its merchandising process and checkout more efficient, many of the retailer's competitors installed similar systems years ago.

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