In spring 2008, Macy's, Inc. began piloting a new localization initiative - My Macy's - developed based on customer research, as well as input from Macy's store managers, senior company executives, merchandise vendors and industry experts. Our goal was to accelerate sales growth in existing locations by ensuring that core customers surrounding each Macy's store find merchandise assortments and shopping experiences custom-tailored to their specific needs.

With My Macy's, the company was able to concentrate more management talent in local markets, effectively reducing the "span of control" over local stores; create new positions in the field to work with central planning and buying executives in helping to understand and act on the merchandise needs of local customers; and empower locally-based executives to make more and better decisions.

This new organizational model was piloted in 20 geographic districts that had been part of three regional Macy's divisions that were consolidated, allowing additional investment in local markets while also generating $100 million in annualized cost savings, beginning in 2009 (more than $60 million in the partial year of 2008).

My Macy's started showing results sooner than anticipated. Early in 2009, the company announced that the My Macy's structure would be rolled out to all Macy's stores nationwide, with the new organization expected to be in place early in the second quarter.

Going forward, 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 are newly created districts. In each district, an average of 23 new positions - primarily in district merchandising and planning - have been created at the local city level to help central planning and buying executives 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 are grouped into eight regions that 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 were created in early 2009 as the My Macy's model was rolled out to the 49 new districts nationwide.

Concurrent with the expansion of My Macy's, the company is being re-formed into a unified operating structure to support the Macy's business nationwide. This change is expected to reduce central office and administrative expense, eliminate duplication, sharpen execution, and help the company to move faster and partner more effectively with its suppliers and business partners. Expense savings are estimated at $400 million annually, beginning in 2010 ($250 million in the partial year of 2009).

The 2009 organizational changes complete the process of transforming Macy's into a truly nationwide brand with local focus and execution in each local market. This distinguishes us from other retailers and represents a sustainable competitive advantage for Macy's going forward.