By  on November 28, 2005

NEW YORK — Terry Lundgren wants to get the right products to the right locations, buff up stores and focus on marketing as his Federated team remakes May stores to create a national Macy's chain.

Lundgren, chairman and chief executive officer of Federated Department Stores, said in an interview he will "sort through all of our options" before making a decision on the future of May's Lord & Taylor division and defended the conversion of Chicago's venerable Marshall Field's to the Macy's nameplate.

The execution of the $17 billion merger, creating a $28 billion, 950-unit Federated, won't be quick or easy. Consolidation will take about another two years, and May employees have to buy into the program to make things work; so do consumers accustomed to shopping the more moderate-priced May stores.

Beyond the broad strokes — renaming virtually all May department stores Macy's and feeding Federated's most profitable private and national brands into the ex-May doors — there is the nitty-gritty of cost-cutting, sell-offs, systems work, human resource concerns, and respacing and rearranging merchandise and categories involved in integrating May into Macy's.

"It's a big project, but when you take May's capital budget, $650 million, and [Federated's] $600 million a year in capital, when you put that together, there's a tremendous amount of resources that you can apply to getting the stores right and making the customer store experience more consistent," Lundgren said.

During the hourlong interview, Lundgren gave a sense of what lies ahead and what he is doing to implement the Macy's strategy. Among the key initiatives are:

  • May stores will be examined "location by location" and put through Federated's planning and allocation machinery to get products and locations in sync. As Lundgren described it, the effort is almost a surgical procedure to determine how products and brands perform at each door and how consumers shop in each market.

    In addition, May doors will get a good dose of Federated's "reinvent" program, which involves retrofitting stores with enhanced fitting rooms, price lookups, signs, wider aisles and increased amenities. The process takes six to nine months per location. "We are working with May management now to identify reinvent work for next year," Lundgren said.

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