Summary
Weak top line sales and an even weaker balance sheet can't be attributed to the recession. Here is why Macys current strategy can't compensate for weak leadership and and an even weaker business strategy.
Analysis
Is this a turnaround strategy, and does the overhead reduction provide confidence that Macy's management is taking the right steps? Two good questions which have a singular answer...No!
On the surface, Macy's is implementing textbook tactics by slashing costs, but it isn't a turn around strategy, since the company's core problems remain unchanged. The fact is Lundgren bet Federated's future on the one department store brand fits all concept and he was wrong. That's been obvious for some time. Granted, he can tinker with merchandising, add brands, and try to improve systems in order to make a bad strategy palpable to the investment community, but whether in terms of top line sales or the balance sheet, Macys has no where to go but down, especially in this economic environment.
As far as the overhead reductions are concerned, investors should be furious with Lundgren. First, HO management costs are not a variable expense, so either management costs were entirely out of control before the recession or command and control functions will crash given the magnitude of cuts. Either way, its obvious, the CEO hasn't been doing his job.
