Macy’s is getting more serious about China and other potential overseas ventures.

This story first appeared in the March 25, 2015 issue of WWD. Subscribe Today.

While no announcement on a China strategy appears imminent, senior-level Macy’s executives have made several trips there in recent months and are narrowing the possibilities.

“We have spent a lot of time studying China. I’ve been over there twice. Terry has been there quite a bit, as I think most people know,” said Karen Hoguet, Macy’s Inc. chief financial officer, referring to Terry Lundgren, Macy’s chairman and chief executive officer.

On the China strategy, “We haven’t figured it out yet,” Hoguet said Tuesday at the Telsey Advisory Group Annual Spring Consumer Conference. “We have done business on the Internet there. We did a test last year for Black Friday, which was very successful. So 10 years ago, when we were looking at China, it was — do we want to open or partner with someone to open lots and lots of stores? Ten years later, as you might imagine, a lot more is focused on the Internet and omnichannel because the world’s changed. So, will we experiment more with e-commerce in China? Will we do something? Maybe. Research would say there’s a lot of demand.”

Macy’s Black Friday test in China involved offering discounts on about 100 items and partnering with the Borderfree global e-commerce platform and Alipay’s ePass payments, logistics and marketing program in China. Bloomingdale’s, Ann Taylor, Saks Fifth Avenue and Aéropostale also participated in the China test.

But the $28 billion Macy’s clearly has an appetite for overseas expansion that’s growing. Long a holdout on the international scene, the department store retailer will open in 2018 a 205,000-square-foot, four-level unit at the Al Maryah Central super-regional shopping complex under development on Al Maryah Island in Abu Dhabi. A 230,000-square-foot Bloomingdale’s will also open in Al Maryah Central, marking that retailer’s second overseas store. The first opened in Dubai in 2010.

The stores will be operated under license by Al Tayer Group, which already operates the licensed Bloomingdale’s store in Dubai. “The store has surpassed any of our expectations,” Hoguet said. “Largely due, by the way, to the partner. We helped quite a bit, but we picked a great partner. It’s helped our domestic business also in two ways.” One is with global tourists, who shopped Bloomingdale’s in Dubai and have begun shopping Bloomingdale’s in the U.S. “We also found that there were some vendors that wouldn’t sell Bloomingdale’s in the U.S. and now they’re selling Bloomingdale’s because they’ve had such a good experience with the brand in Dubai.

“Beyond that, we may do other deals like that in other parts of the world, particularly as you think about Bloomingdale’s,” Hoguet said. “For Macy’s, I’m not sure what will end up happening. But as you might imagine, we get inundated with requests from all over the world for partnerships.”

Sources have said Lundgren has long wanted to break into the China market, either through opening a Macy’s department store or pursuing a private brand strategy, but Hoguet’s comments Tuesday hinted that the very first foray might be via e-commerce.

Hoguet also addressed Macy’s domestic opportunities and growth strategies, including testing Macy’s off-price stores. Explaining the reason for the test, Hoguet said, “First and foremost, it’s more of a treasure hunt to the customer. And that’s something that even though I would argue going to our clearance racks is somewhat of a treasure hunt, it’s not perceived the same way.

“The second is value. That, I think, is more perception than reality as many of you know…But there is a lower AUR [average unit retail] typically in the off-price retailers. And then the third factor is the neighborhood location and not being in the big mall. And we did some consumer research, and the customer said, she likes going to the off-price retailers because she doesn’t have to put lipstick on.

“We’ll test [off-price] and we’ll see. So, a year from now, hopefully, we’ll know a lot more and hopefully we’re rolling out lots of them.”

The cfo also recapped the state of business, citing strength in dresses; active; Millennial-related businesses such as juniors and Impulse shoes, apparel and cosmetics; the Thalia Sodi private brand, which had a better-than-expected launch this month, and beauty. Among the opportunities going forward, Hoguet mentioned the recent acquisition of the Bluemercury indie beauty chain, “all of center core,” and handbags continuing to be “part of the growth engine.”

Macy’s wedding business appears poised for investment and growth, with Hoguet citing the traditional wedding registry and the dresses, tuxedos, jewelry and cosmetics that go with it as opportunities.

On the downside, Hoguet said international tourism declines were impacting retailers in “major metros.” Macy’s Herald Square and Bloomingdale’s 59th Street would be among the flagships hit. “The international tourist is not buying as much, not here as much, and that is going to be a headwind for us, which we knew in February. So there’s nothing new here in terms of people thinking about that. And obviously, for Bloomingdale’s that has an impact, as well as Macy’s Herald Square…and all the big tourist stores.”

Delivery delays from West Coast ports, Hoguet said, “did affect a lot of our receipts, primarily apparel and shoes,” arriving between one and five weeks late. “When fashion goods are delayed five weeks, you’re going to have a compressed period to sell it. And you’re going to have more markdowns.”

She also expressed uncertainty on where consumers will spend their dollars, suggesting that they are often opting for electronics and cable services such as Netflix, at the expense of the product lines at department stores. “The consumer is in decent shape, however, where she is choosing to spend her money is going to be a challenge.”

On women’s apparel, Hoguet said, “I think people tend to think about the traditional ready-to-wear definition. That’s the wrong way of thinking about it, because women are wearing different things. Dresses has become hugely popular…day dresses, social dresses. Active is huge. And we call it active, but I’m as guilty as many, I’m often wearing it when I’m not doing something so active. And so, that’s become a substitute for a lot of what’s traditionally been in ready-to-wear, but the active business is unbelievably strong in women’s, in men’s. So, there is some newness in apparel.”

On closing stores, Hoguet said, “That’s not really because of the Internet. That’s just because the world is overstored, and locations change over time. We’re just pruning the locations that are no longer productive…But I don’t think it’s all because of the Internet.”

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