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Macy's Cuts Its Workforce

Macy's announcement that they are slashing their dividend and laying off 4 percent of their workforce cost us 60 points on the Dow, but it is not a surprising announcement.

All indications are that January retail sales have been as bad as December. Neither the usual January promotions, nor new mixes of clothing has seemed to improve sales. Poor holiday gift card sales also have not helped.

They are expecting same store sales to be down 6 to 8 percent; most retail analysts seem to be expecting sales declines of 8 percent to perhaps as much as 15 percent for other retailers.

So what do we have?

For Macy's and all the retailers, we have comp store sales continue to be weak, margins continue under pressure due to heavy promotions (which will almost certainly lead to lower guidance for 2009), and we have a consumer buffeted by higher unemployment and tight credit. Not surprisingly, consumer confidence reached a new all-time low in January

What's happening now is that the Street will be taking down hopes for a second half 2009 recovery, along with any earnings boost.

Ironically, the only retailer at a new low today is that bastion of discounting: Wal-Mart .

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