NEW YORK — Macy's Inc. announced Monday that it will cut 7,000 jobs, almost 4 percent of its work force, and reduce its contributions to its employees' retirement funds and slash its dividend to preserve cash amid a severe pullback in consumer spending.

The Cincinnati-based department store chain also announced the national rollout of a plan to localize merchandising to specific markets, which it began in some regions last year.

The company, which also delivered downbeat earnings and sales forecasts for the year on Monday, said it plans to integrate all its geographic divisions into a single unit.

Macy's said the job cuts, which include some unfilled positions and 1,900 being eliminated in the restructuring, will come at corporate offices, stores and other locations. The company employs about 180,000 people.

Macy's announced last month - on the heels of the worst holiday shopping season in decades - that it would close 11 stores, affecting 960 employees. The company expects the additional actions announced Monday to lower its annual selling, general and administrative expenses about $400 million per year starting in 2010.

The company also slashed its quarterly dividend to 5 cents from 13.25 cents. The dividend will be paid April 1 to shareholders of record March 13.

"We just believe that this is a time when nothing should be considered a sacred cow," Macy's Chief Executive Terry J. Lundgren said in a conference call with analysts after the announcement.

The news from Macy's came as the Commerce Department released another batch of bad news on consumers' financial health. Consumer spending fell for a record sixth straight month in December as financially strapped households, worried about rising layoffs, increased their savings rates to the highest level since May, federal officials said Monday.

Department stores have been especially hard-hit by the poor economy as shoppers cut spending and turn to discount stores. Last month, Fresno, Calif.-based department store chain Gottschalks Inc. put itself up for sale and said it had filed to reorganize in a Chapter 11 bankruptcy. Dallas-based Neiman Marcus Group Inc. said it was cutting about 375 jobs, or 3 percent of its work force.

Macy's began testing the localization strategy in 20 regional markets last spring and expects the reorganization to be complete beginning in the second quarter this year.

The idea is to concentrate Macy's top talent in local markets and better stay on top of trends by grouping Macy's stores nationwide into 69 geographic districts of 10 to 12 stores each.

Twenty of the districts - in the Midwest, Upper Midwest and Pacific Northwest - were created as pilots in spring 2008 and will remain in place.

In a phone interview with The Associated Press on Monday, CEO Lundgren acknowledged that he would have preferred to take more time with the national rollout. But, given the weak economy, he said, "You have to take action now." Lundgren told analysts Monday that he is looking at the company as a "clean slate of paper" and is "starting from scratch" as he spearheads the overhaul. He also said he hopes Macy's will improve on inventory turns as a result of the restructuring.

He declined to comment on how much inventory will be down this year but said that, given the localization effort, the merchandising team will be better able to eliminate duplications in a given merchandise category in a given market.

Also, as part of the restructuring, Macy's central buying, planning and senior management and marketing functions will be located primarily in New York.

Corporate-related business functions such as finance, human resources, legal, property development and company purchases will be located primarily in Cincinnati.

Clearing out

*Macy's announced last month it is shuttering 11 stores in nine states, including locations in Colorado Springs and at the Westminster Mall - a fallout of the dismal holiday shopping season.

*The Macy's store in Westminster is conducting a clearance sale. No closing date has been set.