Big Memorial Day clearances are approaching, but Macy’s Inc. chairman, chief executive officer and president Terry J. Lundgren sees no need for the kind of desperate discounting that overwhelmed retailers late last year.
This story first appeared in the May 18, 2009 issue of WWD. Subscribe Today.
“I don’t expect the deep promoting that we saw in the fourth quarter last year,” Lundgren said at a press conference following Macy’s annual meeting Friday. “Most retailers got inventories in line with sales. As long as that’s the case, there is no need for crazy discounting.…Our inventory is where we want it to be. We are very religious about staying current with our inventory. We have slightly less clearance as a percent to our total inventory.”
Lundgren also said he believes the poor retail sales trend — Macy’s comp-store sales were down 9 percent last quarter — has “bottomed out.” The company sees sales improving slightly in the second half of 2009, producing a 6 to 8 percent decline for the year overall. Part of the improvement will stem from easier comparisons year-to-year in the second half, although that issue wasn’t raised during the meeting.
“We can see the trend lines — they’re not good but at least it’s more stable at the Macy’s level and not falling. It appears to be bottoming out,” Lundgren observed. He believes the business is easier to read and easier to plan for and that the “good news” is consumers have begun saving money again.
Asked if the price cutting was any deeper than a year ago, Lundgren replied: “Price promoting at Macy’s is very similar to last year. Bloomingdale’s is slightly more. The high-end business is clearly more challenged.”
The $25 billion, 840-unit Macy’s will stage a big sale/clearance event around Memorial Day, as will other retailers. Sales and designer price breaks already have been widespread in the industry over the past two weeks, though somewhat discrete compared to last year’s cacophony, and generally marked by “family and friends” events and discounts from 25 to 40 percent off.
Looking into the future, Lundgren disclosed Macy’s is “researching” the possibility of opening outlets, which has been a growing business at many competitors including Saks Fifth Avenue, Nordstrom and Neiman Marcus. It’s also among the few healthy sectors in retailing along with off-price, mass discounting and online.
“We are researching the idea,” Lundgren said. “It is an opportunity for us. There is an outlet customer that primarily shops outlets.” Lundgren said Macy’s stores draw enough traffic to drive clearances, but he noted outlets could be a vehicle to either clear goods or sell goods specifically manufactured for them.
Also on Lundgren’s agenda is international expansion, although he said that apart from the Bloomingdale’s opening in Dubai in 2010, the earliest another store could open would be in two years. No further international stores have been revealed for either Bloomingdale’s or Macy’s.
During the annual meeting, Lundgren’s main message was that Macy’s future and the key to elevating sales rest largely in the new My Macy’s localization program he has spearheaded. “It is really the headline for our company last year and this year,” Lundgren told shareholders.
Macy’s is investing heavily to staff and develop the program, though Lundgren wouldn’t disclose costs. Instead, he touted savings through Macy’s consolidating its divisions into one central organization.
My Macy’s employs 1,600 people across 69 districts. Each district covers 10 to 12 stores and employs 22 to 25 people, including five to six merchants, five to six planners, a district vice president running the stores and personnel in human resources, operations and other support areas.
The districts report to and are supervised by eight regional organizations, manned with regional merchandisers and planners that report into Macy’s central organization in New York, which in turns analyzes and feeds merchandise requests to vendors. The vendors, Lundgren noted, “are hungry” for the business and getting more nimble in meeting orders tailored to the local level.
My Macy’s has just been rolled out nationally, but in the year since the first 20 “pilot” districts were launched, Lundgren said, “Our new local merchants and planners formally submitted nearly 13,000 documented ideas for improving the business in specific stores. About 90 percent of those ideas were approved for implementation. These ideas including identifying opportunities for different sizes, colors, brands, fabric weights, styles and product categories that could better serve customer needs and desires in local markets. So imagine the power of My Macy’s as we roll it out nationally and refine the execution.”