NEW YORK — As May Department Stores Co.’s bottom line fell 87.1 percent on a 17 percent sales gain for the third quarter, the retailer told Wall Street it was rededicating itself to improving merchandise freshness in the fourth quarter in order to attract younger consumers.

The company said during a conference call Tuesday discussing results that its fourth-quarter strategy is to differentiate itself by offering distinctive holiday gifts.

Plans include a shift in its marketing strategy to more television advertisements highlighting holiday “must-haves.”

“The campaign is designed to reinforce our stores as a gift headquarters and as a fun and cool place to shop,” said vice chairman Bill McNamara on the call. As such, the company’s holiday marketing slogan is “Gifts That Excite,” similar to last year’s “Always Something Exciting.”

The company said through the fourth quarter it plans to identify new traffic generators, increase proprietary sales, pursue better and younger business segments and make shopping simpler by eliminating product duplication. Inventory is well placed for the quarter, down 4 percent on a store-for-store basis from last year.

“Our key initiatives in the better and young elements of our business, and in proprietary product, must be more productive,” said McNamara. “We must be more successful in keeping pace and moving faster with the ever-changing needs and wants of a broader customer base.”

Luxury holiday gifts are seen as signature handbags from Coach Inc., cashmere, fragrances and diamonds. The company also has boosted gift offerings in its tech gift centers, including Apple iPod Minis, Sony camcorders and digital cameras.

Meanwhile, May has been striving to improve operations since last year when it decided to divest 34 underperforming Lord & Taylor stores; it has 15 left to go. May also upgraded point-of-sale equipment in 59 stores — reducing average transaction times by 20 percent — and is rolling out overhead directional signage, which is expected to be in 113 stores by the end of next spring.

The company also remained busy incorporating its three-month-old acquisition of Marshall Field’s, and expects to have the 62 stores’ information technology systems incorporated with its own by March 2005.

This story first appeared in the November 10, 2004 issue of WWD.  Subscribe Today.

Hurt partially from Marshall Field’s purchase, however, May reported earnings of $8 million, or 2 cents a share, in the period ended Oct. 30, compared with $47 million, or 15 cents, in the year-earlier quarter. The latest results included Lord & Taylor store divestiture costs of $1 million and early debt redemption costs of $10 million, while results in the year-ago quarter included store divestiture costs of $6 million.

The company said the rest of its acquisition of the Marshall Field’s stores from Target Corp., which was finalized in late July, is going smoothly but that it negatively impacted the latest quarter’s earnings by 6 cents, of which start-up integration expenses totaled 3 cents.

Excluding store divestiture expenses, May earned $9 million, or 2 cents, in the third quarter, versus $51 million, or 16 cents, in the 2003 comparable quarter. On this basis, analysts were calling for a profit of 8 cents.

Total revenues were $3.5 billion, up 17 percent from the prior year’s $3 billion. The company said same-store sales fell 3.4 percent, but excluding the remaining 15 stores the company said it will divest, store-for-store sales decreased 3 percent.

St. Louis-based May said certain merchandise categories had good sales in the quarter, such as ladies’ suits, tailored sportswear and fashion accessories. But the company was disappointed overall in the results, saying home sales trends remained difficult and the back-to-school season was mixed. Other weak categories included dresses and intimate apparel.

In the first nine months of fiscal 2004, May reported earnings of $185 million, or 59 cents, up from a profit of $9 million, or a loss of 1 cent, in the year-earlier period. Revenues were $9.4 billion, from $8.9 billion last year, a 6.2 percent gain.

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