Updated from 3:43 p.m. EST

Macy's

(M) - Get Report

said Monday it will take a series of steps to lower costs and better cope with the economic slowdown, including cutting jobs and reducing its dividend.

The company said about 7,000 positions are being eliminated, equaling around 4% of its total workforce. Additionally, Macy's will cut its quarterly dividend to 5 cents a share from 13.25 cents.

The retailer said it wants to pare expenses by around $400 million a year starting in 2010. Merit salary increases for executives for their 2008 performances are being eliminated across the company. Macy's also plans to lower the level of its match to employee 401(k) contributions in 2009.

As part of the overall plan, the company is expanding its "My Macy's" program. The program is meant to make stores focused on local customer needs and preferences. Macy's also began an offer to redeem $950 million in debt that's maturing later in 2009.

Macy's said the expense-cutting proposal should cost about $400 million before taxes. For the fiscal year ahead, Macy's said it sees a "very challenging environment." Same-store sales probably will drop between 6% and 8%, the company said. Macy's forecast earnings of 40 cents to 55 cents a share. On average, analysts are expecting 87 cents.

Shares of Macy's were down 4% at $8.59. Elsewhere in the retail sector,

Wal-Mart

(WMT) - Get Report

,

Sears

(SHLD)

,

Target

(TGT) - Get Report

and

JC Penney

(JCP) - Get Report

all traded lower.

This article was written by a staff member of TheStreet.com.