Macy’s Inc. has elevated its outlook for sales and earnings this year and will retrain 100,000 selling associates this summer to help reach its goals.
“We have never trained 100,000 people before. This will be a big subject for us,” Terry Lundgren, Macy’s chairman, chief executive officer and president said Tuesday during a conference with investors.
Earlier in the day, the $23.5 billion, 850-unit Macy’s forecast same-store sales for fiscal 2010 to grow 3 to 3.5 percent, compared with previous guidance of 1 percent to 2 percent. Earnings per diluted share for fiscal 2010 are now projected at $1.75 to $1.80, compared with previous guidance of $1.55 to $1.60.
For the first quarter ending May 1, the company expects same-store sales to rise about 5 percent, consistent with guidance provided April 8. EPS is expected to be about breakeven. This includes $27 million in premium and fees related to repurchase of debt, as previously announced. In last year’s first quarter, the company lost 16 cents per diluted share, excluding restructuring charges.
Aside from retraining sales associates, Macy’s expects momentum from the My Macy’s field organization, enabling the chain to get a better read on what consumers want and don’t want at each store, multichannel integrations and exclusive merchandise.
The department store is also stepping up efforts to cater to younger demographics. “We don’t discount any area where we are looking for opportunities but definitely in the young area…there is an opportunity,” said Timothy Adams, chief private brand officer.
Jeffrey Gennette, chief merchandising officer, said Macy’s in 2011 will have a new strategy to appeal to younger customers that capitalizes on a range of merchandise he characterized as “the new contemporary,” which is priced below the premium sector and above juniors. “We see big brands and potentially private brands that will play to that,” he said.
The sales training program, called “Magic Selling,” is geared to teach associates how to better engage and sell to customers, including greeting them and asking questions. Associates are getting “scorecards” to keep tabs on how much they sell to determine who needs remedial training. Service has a been a big void at Macy’s, though more strides have been made at the Bloomingdale’s division.
In addition, customers will be surveyed on how likely they are to recommend Macy’s to a friend, on a zero to 10 scale. The survey will help Macy’s determine whether shoppers like or dislike the service, the assortments and the store environments.
As reported, Macy’s Herald Square is expected to get a major overhaul touching the 34th Street facade and entrances, the infrastructure and selling floors. Macy’s annual capital expenditure budget is seen growing from around $600 million this year to $800 million in 2012.
“In 2011, there will be some major stores that we’ll impact,” Lundgren said. “We’ve done Bloomingdale’s [on 59th Street] and it’s rumored that this store [Macy’s Herald Square] will have a facelift.” Lundgren said there were plans for Herald Square that were put on hold. “Probably the best return on investment will be this store. It can sell more Louis Vuitton handbags than anyone in the nation. This store will eventually get on that track. That’s when you will see the cap ex expand.”
To better reflect U.S. generally accepted accounting principles, Macy’s will make a change in its reporting, starting in the first quarter of 2010, involving selling private brand goods to outside third-party retailers and excess inventory to third parties at the end of a season. In the past, the P&L impact of these items was accounted for, net of the related cost of sales, in selling, general and administrative expense. Going forward, sales and cost of sales from these items will be reflected, on a gross basis, in Macy’s total sales and cost of sales. Macy’s said this won’t effect earnings before interest and taxes but total sales will increase.
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