After centralizing, building a field network to tailor assortments locally, and private label initiatives, what’s left for Macy’s to do to pump up sales? Get vendors to step up to the plate.

This story first appeared in the May 14, 2009 issue of WWD. Subscribe Today.

“The brands have to find strength and trend-right merchandise with the right value equation for the overall women’s sportswear equation to improve,” Terry Lundgren, Macy’s Inc. chairman, chief executive and president, said in a conference call Wednesday.

Such an improvement is critical, particularly after Wednesday’s first-quarter results marked by an $88 million loss, compared with last year’s $59 million loss, and a 9 percent comp-store sales decline. Total sales for the three months ended May 2 fell 9.5 percent to $5.2 billion from $5.74 billion. Excluding restructuring charges, Macy’s lost 16 cents a share for the quarter, better than the expected 19- to 21-cent loss.

And despite signs the economy may be bottoming out, Macy’s isn’t expecting any miracles very soon, as officials see this sales trend continuing in the second quarter. For the year, they project comp-store sales to decline 6 to 8 percent, and earnings per share of 40 to 55 cents. The results and outlook dragged Macy’s shares down 6.7 percent during a tough day for retailers generally on Wall Street (see related story below).

Aside from the economy, Macy’s has been hampered by weak performances in better apparel, handbags, luggage and furniture. The best-selling categories are moderate apparel, dresses, suits, cosmetics, young men’s, housewares and private brands. Geographically, New York City, Florida and California remain the most challenged, while the Midwest and Texas are healthier regions.

While the $25 billion Macy’s has restructured more than just about any retailer, excluding the bankrupt ones, it’s not about to abdicate any ground in apparel. “We are a fashion retailer. We are not going to change that,” Lundgren said. “The brands themselves have to perform in the better category.”

In certain cases, “There are brands that are working. It’s not like the customers aren’t finding products that are new and fresh and have the right value equation,” Lundgren said, citing as a standout Tommy Hilfiger. Macy’s officials later told WWD that Clark’s and Bandolino shoes, Kenneth Cole Reaction, DKNY Jeans, Jones New York and Izod are also performing well.

“But the best-performing brands have been our private brands,” Lundgren asserted in the call.

Asked why private brands — which include INC, Charter Club, Alfani, Style & Co. and American Rag — outsell market brands, Lundgren said: “There is such a direct connection with designers and merchandisers of the product and the people in our stores, and in getting response from customers and top sales people. That becomes a real advantage.”

Private brands represent 19 percent of Macy’s assortment, while exclusives from vendors represent over 20 percent.

Putting action behind Lundgren’s words, Macy’s plans to lean harder on Seventh Avenue to boost sales and margins. One area is in greater speed to market. “It will definitely expand with vendor partners,” Lundgren said.

He also said the store’s everyday value program will become more prevalent with market brands. It’s already widespread in key private label items and classifications such as shorts and sweaters, which are priced at “great sharp values” and not intended to be promoted. “That product is selling extremely well. We have more of that product in private brand, though many of our vendors are either doing everyday value in a small way or planning it for the fall,” said Lundgren.

Following the company’s restructuring from divisions into a centralized operation, “Ninety-five percent of our merchants are in New York City. There is an absolute advantage for us in being the market.” About 5 percent of the buying team is in Los Angeles to shop the contemporary market

Macy’s also wants to expand its range of exclusives from vendors. “We are looking at opportunities throughout the store,” chief financial officer Karen Hoguet said during the conference call.

Meanwhile, the chain is counting on its My Macy’s field network to lift sales by being able to stay close to local markets and inform the central organization of products, styles, colors and sizes in demand. It’s been rolled out nationally with a staff of 1,600 across 69 districts. “I am just not satisfied at all with our minus 9 percent [sales drop],” Lundgren said. “We have to do better. It’s going to be the My Macy’s initiative that is going to take us to that better level.”

Lundgren said by centralizing, “We had a gigantic systems conversion. It was extremely smooth. There was a big sigh of relief last Sunday” when the conversion was complete. In addition, “We have aligned our planning organization directly with our buying organization — one planner to one buyer. So far we feel very good about both the people and the process that is in place to insure that fourth-quarter purchases are lined up properly.”

He also said the inventory level and currency of the goods were at planned rates, and that Macy’s can project sales better than it could six months ago.

Lundgren doesn’t expect Macy’s to be any more promotional this spring than a year ago, with the exception of a friends and family sale staged in reaction to the competition’s. “Consumers are reacting very well to our big sales events, as you would expect in this environment.…We do just fine on big events. More challenging is the day-in, day-out in between activity,” he said.