UPDATE 2-Macy's cuts 7,000 jobs, slashes dividend

(Adds details, analyst comment, byline)

By Aarthi Sivaraman

NEW YORK, Feb 2 (Reuters) - Macy's Inc said on Monday it would slash about 7,000 jobs and cut its quarterly dividend as it forecast full-year earnings for fiscal 2009 that were far below Wall Street expectations, sending its shares down 7 percent.

The department store operator said it took the steps to counter what it expects will be a very tough retail market this year, and that it would plan conservatively despite efforts by the U.S. government to build an economic stimulus package.

Macy's expects these steps, which also include integrating its divisions into one unit, to reduce its previously planned expenses by about $400 million per year starting in 2010, and $250 million in part of 2009. Its Bloomingdale's stores will not be affected by these initiatives, Macy's said.

But to win consumers over in the recession, Macy's would have to be more promotional, said Patricia Edwards, a retail analyst with Storehouse Partners.

"The retail environment has changed so much. They have not been competing on a value proposition and this is a value market," she said.

The job cuts amount to about 4 percent of the company's workforce. Macy's cut its quarterly dividend to 5 cents per share from 13.25 cents.

The company said it expected to earn 40 cents to 55 cents a share, excluding restructuring costs, for fiscal 2009, below the average analyst view of 79 cents per share, according to Reuters Estimates. Same-store sales are expected to decline between 6 percent and 8 percent, Macy's said.

Macy's said it would build on its store localization initiative, originally announced nearly a year ago to boost sales and cut costs, to focus on each local market's sales and customer needs.

According to that plan, it will group its stores into 69 geographic areas with an average of 10 to 12 stores in each district.

Macy's will integrate all its functions into a single unit, with its central buying, merchandise planning and senior store management and marketing units to be located primarily in New York. Its corporate affairs office will remain in Cincinnati.

The company said it would not raise salaries for executives in spring 2009 and will also cut the amount of matching 401(k) contributions in the year.

Macy's shares fell 54 cents to $8.41. Shares also slipped for some of its major vendors, such as Liz Claiborne, which dropped 8.2 percent, and Jones Apparel, which slid 5.5 percent. (Reporting by Aarthi Sivaraman, additional reporting by Nicole Maestri; Editing by Lisa Von Ahn and Gunna Dickson)