MACY'S ANNOUNCES MASSIVE
RESTRUCTURING AND CENTRALIZATION

CINCINNATI -- Macy's, Inc. has announced a series of actions  designed to reduce expenses by  $250 million in the partial year of 2009 and by $400 million per year beginning in 2010.

Macy's will operate as a national brand but with stores and merchandise assortments focused on local customer needs and preferences in each location., the company said. 

Under the plan, the New York-based Macy's Home Store and Macy's Corporate Marketing divisions will no longer exist as separate entities. Bloomingdale's will remain a separate brand and organization and is not affected by the moves.

Existing Home Store functions will be integrated into the Macy's national merchandising, merchandise planning, stores and marketing organizations.

Macy's Corporate Marketing will be integrated into the new unified marketing organization. The New York-based Macy's Merchandising Group will be refocused solely on the design, development and marketing of Macy's family of private brands.

The massive restructuring is designed to position the company for increased sales, profitability and cash flow once the economy recovers, according to Macy's.

"With our new structure, Macy's now will have one unified buying organization, one unified merchandise planning organization, one unified stores organization, one unified marketing organization and one unified organization for each corporate function such as finance, logistics, information technology and human resources - instead of four of each operating divisionally," said Terry Lundgren, chairman, president and chief executive officer.

"By reducing duplication, we will be able to react faster to market trends, simplify our relationship with vendors and ensure that our expense dollars are devoted to activities that will drive the business most effectively."

The following details on the restructuring were released by Macy's on Feb. 2, 2009.

• "My Macy's," a customer-centric localization initiative piloted in 20 selected geographic markets since Spring 2008, will be expanded across the U.S.
• As My Macy's is rolled out nationally to new local markets, Macy's, Inc. will be re-formed into a unified operating structure to support the Macy's business.
  
  This is expected to reduce central office and administrative expense, eliminate duplication, sharpen execution, and help the company to partner more effectively with its suppliers and business partners, according to Macy's.
   
• Given current economic conditions and expectations for lower sales in 2009, the company is taking other actions to increase profitability and cash flow. Macy's, Inc. is adjusting its workforce in stores, distribution centers and various corporate functions, as well as reducing discretionary spending. A total of 7,000 jobs will be eliminated.
   
• The Board of Directors has voted to reduce the Macy's, Inc. quarterly dividend to five cents per share of common stock from the current 13.25 cents. The company has also initiated a tender offer to redeem $950 million in debt that is maturing later in 2009.
   
• A new Macy's, Inc. executive management team will lead the corporation going forward under the continued direction of Terry J. Lundgren, chairman, president and chief executive officer.

Discussing the My Macy's district structure, Lundgren noted that the company has seen positive results from a pilot program for it's My Macy's district structure.

 "In fact, of the company's top 15 best-performing geographic markets in December, 13 were My Macy's pilot districts. We are moving quickly and decisively to expand this model to all of our markets so we can pursue sales-driving opportunities as we position ourselves to capture share in every local market," according to Lundgren.

" In the short- and long-term, the actions being announced today will make us a more lean and efficient company and a stronger competitor," Lundgren said.

My Macy's Expansion

In order to concentrate more management talent in local markets and reduce "span of control," all Macy's stores nationwide will be grouped into 69 geographic districts that will average 10-12 stores each, effective in the second quarter. Of those, 49 will be newly created districts. The other 20 districts (in the Midwest, Upper Midwest and Pacific Northwest) were created as pilots in spring 2008 and will remain in place.

The nationwide district structure will position Macy's to develop and implement more effective strategies for identifying and serving specific consumer needs location by location. This is consistent with ongoing development of customer-centric business initiatives to leverage knowledge of customer segments to drive same-store sales, profitability and customer loyalty.

In each of the 49 new districts, an average of about 23 new positions - primarily in district merchandising and planning - will be created at the local city level to help central planning and buying executives to understand and act on the needs of local customers. In addition, district-based executives, including a district vice president, district merchants, district planners and individual store managers, will be empowered to make more and better decisions for their local customers.

The 69 Macy's districts will be grouped into eight regions that will be based in the Chicago, Houston, Miami, Los Angeles, New York, Pittsburgh, San Francisco and Washington, D.C. areas. Each region will include an organization of 35 to 40 executives to oversee merchandising, planning and various support operations. Special events and marketing public relations staffs also will be located regionally around the country.

In all, a total of approximately 1,200 new district and regional positions will be created in 2009 as the My Macy's model is rolled out to the 49 new districts nationwide.

Creating a Unified Organization

As My Macy's is adopted nationally to enhance focus on local markets, Macy's will become one unified national operation that will streamline decision-making, strengthen and simplify relations with vendor partners, and eliminate duplication in functions such as planning and buying, marketing and stores supervision. The new organization will be in place beginning in the second quarter of 2009.

Effective immediately, the company will begin the process of eliminating its Macy's division structure and integrating all functions into a single organization. Macy's central buying, merchandise planning, stores senior management and marketing functions will be located primarily in New York. Corporate-related business functions such as finance, human resources, law, property development and purchasing - including those now performed at the division level - will be located primarily in Cincinnati. While the size and nature of some functions based in New York and Cincinnati will be adjusted to align with current business needs while others are centralized for efficiency, Macy's, Inc. net workforce in these two cities is expected to increase nominally to support the nationwide Macy's business.

The elimination of existing divisional central office organizations will primarily affect approximately 1,400 positions at the Macy's West headquarters offices in San Francisco, approximately 850 positions at the Macy's Central headquarters offices in Atlanta, and approximately 600 positions at the Macy's Florida headquarters offices in Miami. A number of executives currently in the Macy's West, Macy's Central and Macy's Florida central organizations will be reassigned to new region and district roles, or considered for a number of new positions in New York and Cincinnati. While New York-based Macy's East will no longer exist as a division going forward, many members of the current division merchandising, planning, stores management and marketing staffs will be part of the new unified organization.

Workforce Reductions

A companywide total of approximately 7,000 positions are being eliminated from the company's workforce in offices, stores and other facilities. This total includes the  approximately 1,200 positions being added to new My Macy's districts and regions.

The net reduction of 7,000 positions represents about 4%of the company's total current workforce of about 180,000 positions. There is a much higher percentage of reductions in central office functions where nearly 40% of executive positions are being eliminated as part of the centralization.

 In some cases, the reduction involves positions that currently are unfilled. Employees whose positions are eliminated will have the opportunity to express interest in other available positions. Employees who are laid off in this process will be provided severance benefits and outplacement assistance, according to the company.

"Reducing our workforce is an unfortunate outcome of the current economic environment, and I am frustrated that so many of our people will be unable to move forward with us as we proceed into a very exciting future for Macy's and Bloomingdale's," Lundgren said. "Be assured we will be sensitive to all affected employees, work diligently to find other positions for as many of them as possible, and treat everyone with respect and honesty."

Other than the previously announced closure of 11 Macy's stores, all current Macy's and Bloomingdale's store locations will remain in place, as will macys.com and bloomingdales.com.

Other Actions to Reduce Expenses
 and Conserve Cash

The company has begun a process of reducing approximately 5,100 positions nationwide from its stores, distribution centers and offices so the size of the company's organization is aligned with current consumer demand and expectations for lower sales in 2009. (These 5,100 positions are included in the total net reduction of 7,000 positions.) The reduction in store staffs averages five to six positions per location and is designed to minimize any impact on customer service.

Merit salary increases for executives considered in spring 2009 for performance in 2008 are being eliminated across the company. The company also will reduce the level of its match to employee 401(k) plan contributions in 2009. In addition, management will be recommending to the Board of Directors a reduction in perquisites for executives, including merchandise discounts, company cars, company-paid life insurance and financial counseling.

The Board of Directors has voted to reduce the Macy's, Inc. quarterly dividend to 5 cents (20 cents annualized) per share of common stock from the current 13.25 cents (53 cents annualized). The new quarterly dividend will be payable April 1, 2009, to shareholders of record at the close of business of March 13, 2009. The reduction in dividend is expected to conserve $138 million in cash in fiscal 2009.

Executive Management Team

Going forward, Macy's, Inc. will be led by a corporate executive management team headed by Terry Lundgren, who will continue to be chairman, president and CEO of the corporation and remain based in New York. Lundgren's leadership team will include.

• Timothy M. Adams, currently chairman and CEO of Macy's Home Store,  becomes Chief Private Brand Officer. He will be responsible for the organization that concepts, designs, sources and markets the company's portfolio of highly successful private brands;
• Thomas L. Cole, currently vice chair of Macy's, Inc., who becomes Chief Administrative Officer. He will be responsible for operations functions and non-financial corporate functions, including credit, logistics, systems, property development, non-merchandise purchasing, human resources, corporate communications and employee relations. In addition, Cole will have administrative responsibility for law and internal audit functions that will report directly to Lundgren;
• Mark S. Cosby, currently president and COO of Macy's East, who becomes President-Stores. He will primarily be responsible for all Macy's store operations and support functions;
• Jeffrey Gennette, currently chairman and CEO of Macy's West, who becomes Chief Merchandising Officer. He will be responsible for all buying and merchandising functions for Macy's nationwide, as well as for relations with market vendor partners;
• Julie Greiner, currently chairman and CEO of Macy's Florida, who becomes Chief Merchandise Planning Officer. She will be responsible for centralized merchandise planning and assortment allocations by store, as well as the district/region merchandise planning structure and function;
• Karen M. Hoguet, currently EVP and chief financial officer, who remains Chief Financial Officer. She will be responsible for all financial-related activities of the corporation;
• Ronald Klein, currently chairman and CEO of Macy's East, who becomes Chief Stores Officer. He will be responsible for the nationwide portfolio of Macy's stores, including the My Macy's region and district organizations;
• Peter Sachse, currently president of Macy's Corporate Marketing, remains the company's Chief Marketing Officer, as well as chairman and CEO of macys.com.
• Michael Gould remains chairman and CEO of Bloomingdale's.
• Vice Chair Thomas G. Cody, 67, will continue to have responsibility for working with and advising the CEO on issues relating to the Board of Directors and corporate governance. Cody, who will continue to coordinate Cincinnati-related activities, also will direct the company's non-marketing-based philanthropic activities and will remain president of the Macy's Foundation until his retirement early in 2010.
• Vice Chair Janet E. Grove, 58, also currently chairman and CEO of Macy's Merchandising Group, will facilitate the transition of merchandising, planning and private brand development functions until her retirement in mid-2011. In addition, Grove will assume responsibility for the company's International Retail Store Development initiatives during this period.
• Vice Chair Susan D. Kronick, 57, who currently oversees Bloomingdale's and Macy's retail divisions, will co-lead the My Macy's integration (along with Cole). Kronick also will play an integral role in advising on talent selection and development of the new My Macy's organizational structure as it is expanded across the country and will facilitate the transition of stores, merchandising and planning functions until her retirement early in 2010. Kronick also will continue to oversee Bloomingdale's throughout 2009.

Financial Aspects

The savings from the actions announced today, net of the amount invested in localization initiatives, are expected to reduce previously planned Macy's, Inc. SG&A expense by approximately $400 million per year, beginning in 2010. The partial-year reduction in SG&A for 2009 is estimated at approximately $250 million.

Pre-tax costs associated with today's announcements will be approximately $400 million in cash, most of which are expected to be taken in fiscal 2009. This will include severance and outplacement assistance for displaced employees, as well as relocation assistance.

2009 Guidance

While uncertainty in the economy continues to make predictions of future performance difficult, Macy's, Inc. is assuming a very challenging environment through the remainder of fiscal 2009, according to the company.

"In spite of the fact that the economic stimulus package currently being considered by Congress may improve the trend in consumer spending, we are planning conservatively to ensure our inventory, expenses and capital expenditures are appropriate. As such, the company currently is assuming that same-store sales in 2009 will be down between 6% and 8%

The company has further reduced its 2009 capital expenditures budget to approximately $450 million. This is $100 million to $150 million less than the $550 million to $600 million previously announced, and down from an original 2009 budget of approximately $1 billion.