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Myron Ullman: Keeping Macy’s in Motion

NEW YORK -- Despite all the chaos created by its Chapter 11 filing in January 1992, the difficult negotiations over a reorganization plan and a takeover attempt by Federated Department Stores, the $6.3 billion R.H. Macy & Co. remains a force in...

NEW YORK — Despite all the chaos created by its Chapter 11 filing in January 1992, the difficult negotiations over a reorganization plan and a takeover attempt by Federated Department Stores, the $6.3 billion R.H. Macy & Co. remains a force in U.S. retailing.

Myron E. Ullman, Macy’s chairman and chief executive officer, is the man in the middle of one of the most tumultuous periods the legendary chain has ever experienced.

The other day, he sat for a wide-ranging interview in his offices in the Herald Square flagship and although he did not address the bid by Federated and said little about Macy’s Chapter 11 situation, he did talk at length about some of the store strategies implemented in the wake of its bankruptcy filing.

Ullman also cited the growth in moderate sportswear, the rebound at I. Magnin, specialty store expansion involving Aeropostale and Charter Clubs and outlined the status of TV Macy, which he expects to reach television screens next year.

Q: Do you expect a second-half retail pickup?

A: I think most analysts are talking about the apparel cycle, which obviously has been in a trough for an extended period. We’re cautious in our planning. We’d rather err on the side of a 2 or 3 percent comp-store growth. Keep in mind our primary markets are the Northeast and California, which have lagged all other markets in terms of recovery. But in the long run, we think Macy’s will benefit because those areas are the most populated, contemporary markets. The fact that we have large stores that are well located, and assortments that appeal to a broad cross-section of customers, is the strength of our franchise.

Q: What have been the strongest categories for Macy’s recently?

A: Fashion home, domestics, tabletop and housewares. And we are clearly seeing an emergence of the men’s business. We’re also seeing the young businesses rebound – kids’, juniors’, young men’s. Fine jewelry has been good all along.

Q: What’s lagging?

A: Accessories, dresses and shoes. The big question mark is sportswear. We’re experiencing significant growth in moderate sportswear, a thrust in our business plan, and bridge sportswear is doing well. Better sportswear has been difficult.

Q: What do you expect to perform best in the remainder of the year?

A: Let’s talk about the home business. As long as people perceive that interest rates are relatively stable, then home improvement will probably continue. We are well positioned to capitalize on that since ours is primarily a fashion home business. In apparel, we see men’s strong through the year. In misses’ sportswear, we see moderate doing very well. It’s unclear what happens with better.

Q: What are the strengths of Macy’s apparel business?

A: In misses’ apparel, it’s soft, casual, affordable fashion. The weaker parts are the structured, career pieces in better prices. We’re seeing some life in bridge. That tends to influence the better assortments.

Q: How is the new relationship with Levi’s?

A: We’re now in all 111 department stores with Levi’s and Dockers products. We started with 26. We had extraordinary success with the Authentics program, the upper end of Dockers.

Q: Is the buyer-planner-store strategy working?

A: It’s the core of our business plan, and we honestly feel it’s a superior merchandising strategy that delivers better assortments by location. The logic is that with strong, professional merchants in the market, they’ll have more time to develop product with vendors and integrate our own product. The planner has to think about the by-location issues and work with the buyer on assortment.

It’s a fundamental change in the way we do business.

You must have on-line merchandising systems that are integrated so that the buyer, the planner, the store people and the financial people have access to the same information.

Information is power and the more you know, the better shot you have at making the right decision. That was a major investment.

And our investment in point-of-sale technology — $90 million — is an extension of taking what we already have as merchandising information and moving it way out to the sales associates. Investment in technology, frankly, is the price to play the game. You can’t compete without it.

Q: How is I. Magnin performing overall?

A: Magnin’s is rebounding. It made its profit plan for March. It would have been much easier to build 12 stores than to go from 31 to 12. It’s very hard to take a big business and make it smaller and more focused in terms of expense structure and the other things.

As we focused on our department store restructuring, Magnin’s was a step behind. It’s catching up.

Q: When do you expect it to turn a profit?

A: We show in our business plan that in fiscal ’95, which starts in July, it contributes cash.

Q: What’s new with the specialty stores?

A: We have 63 Aeropostale stores and 29 Charter Clubs. We’ll be opening 40 Aero stores next year. We’ve committed about 10 percent of our capital into growing those businesses. Both are running double-digit comp-store increases and have high sales per square foot compared to other specialty stores. The Charter Club customer is a very loyal repeat customer that understands the lifestyle and concept of the line. Aeropostale is a much different concept. It’s fast, it’s moderate, but it’s fashion. It takes a while for people to understand it. We’re not advertising either of those businesses, so they’re living off mall traffic. We’ve found that after three years, stores reach their full potential.

Q: Do you have growth plans for the Macy outlets?

A: We have 15 now and that’s what we’re committed to. The primary purpose of the outlet is to keep the merchandise flowing in our 111 department stores.

We’ve learned a lot. We do better when we anchor a strip mall and the customer can see us from the street, drive up and shop regularly. We will start buying merchandise for those stores to make sure the assortments are balanced. There are times when we don’t have kids’ or men’s dress shirts. We do very well in Indianapolis, Dayton, Cincinnati — places where it’s the only Macy’s concept. The stores are also profitable at this point, which is a big plus.

Q: When will TV Macy’s get off the ground?

A: We’ll start testing this fall with some of our key vendors and I think that you’ll see a ’95 launch as we develop our partnership with Cablevision and other partners.

We expect — and this is key — to do business with our key vendors on the same basis that we do business in the store. We’re going to price the merchandise the same and assort it the same. If it doesn’t fit or the customer doesn’t like it, they can bring it back to the store. We see it as an opportunity to bring the customer into the store for other things as well. The customer can shop with confidence that they’re going to see the same kind of things they would see in our stores.

We found out that most customers today question whether or not what they see on the air is the same as what’s in the store, even if it has a brand name. But I think the combination of Macy’s and the national brand and to be able to return it to the store proves that it’s the same thing.

We’ll start out with hard goods and home being prominent, because they’re easiest to understand. But we’ll experiment with all categories. When you have 24 hours, you have lots of opportunities.

Q: Because of the Chapter 11 and vendors’ displeasure with the payout in the Macy’s plan, any problems getting shipments?

A: Our vendor relationships have never been stronger. We’ve been doing business for several years since Chapter 11 so even those that have claims have had an opportunity to get back into business, and our cash position has been extraordinarily strong all along.

We have a $550 million cash facility for working capital and we may not even use it this spring at all. I can honestly tell you, I can’t remember one vendor in the last year who was concerned about shipping Macy’s.

Q: Do you believe Macy’s will emerge from Chapter 11 intact?

A: I would be satisfied if our creditors fully understand our strategy, know the strength of our team and appreciate the strength of our customer franchise. If they truly understand that, they’ll recognize the tremendous value created by the rebuilding of the company. Our responsibility is to maximize that value. But if some other alternative maximizes it, they have to make that decision too.

Just to clarify, we have one decision that is based on a board responsibility, which is to maximize whatever the alternative is. On the management side, clearly we’re very focused on rebuilding a stand-alone Macy’s.