Improving future sales and earnings performance requires innovation in engaging our customer more effectively in every store, as well as reducing total costs. At Macy's, resources were reallocated for 2008 and beyond to place more emphasis and talent at the local market level to differentiate stores, serve customers and drive business.

The initiative called "My Macy's" was developed over the past year based on customer research, as well as input from Macy's store managers, senior division executives, merchandise vendors and industry experts. Its goal is to accelerate sales growth in existing locations by ensuring that core customers surrounding each Macy's store find merchandise assortments, size ranges, marketing programs and shopping experiences that are custom-tailored to their needs.

To maximize the results from My Macy's, the company is taking action in certain markets that will:

• 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 division central planning and buying executives in helping to understand and act on the merchandise needs of local customers;
• Empower locally based executives to make more and better decisions.

In essence, the plan is to drive sales growth by improving our knowledge at the local level and then acting quickly on that knowledge. These moves will benefit our customers as well as our shareholders.

A new structure is being adopted in geographic markets that had been part of the Macy's North, Macy's Midwest and Macy's Northwest divisions, which are being consolidated into Macy's East, Macy's South and Macy's West, respectively. Reallocating central office expense from the three consolidated divisions will allow Macy's, Inc. to invest in market localization while reducing the company's SG&A expense by approximately $100 million in 2009 ($60 million in the partial year of 2008). In addition, it is believed that these consolidations will speed up decision making and simplify the process of working with our vendors.