MACY’S EAST GROUNDING ELECTRONICS

Byline: David Moin

NEW YORK — In a bold move to bolster its “core” businesses, particularly women’s special sizes, men’s wear and home furnishings, Macy’s East said Tuesday that it will drop electronics, once considered a strong traffic generator but lately more aligned with high costs and low margins.
Products from Sony, Panasonic, Toshiba, Awai, Magnavox, RCA and JVC, among other leading electronics suppliers, are currently sold at about 60 of the 90 Macy’s East full-line department store locations.
The hard goods will disappear from Macy’s beginning in May to make room for large size labels, possibly Elizabeth (Liz Claiborne’s large size line) as well as Gianni, Jones, and Macy’s own Charter Club line, all offering special sizes.
Macy’s executives believe the special size business has been underplayed and has enormous growth potential.
For electronics, Macy’s Herald Square flagship has operated a huge department exceeding 7,000 square feet on the ninth floor. It has a reputation for bringing in big crowds and yielding a high rate of turnover, but also being highly promotional to meet the competition from specialty stores, and lacking sufficient service.
Last year, electronics accounted for over $90 million in volume at Macy’s East.
Jim Gray, Macy’s East president and chief operating officer, said Tuesday, “This is an important decision. It involves a lot of volume, a lot of space, and it affects 300 people — sales associates and buyers. We will try to place as many as possible.” Severance packages are also being offered, Macy’s said.
“In evaluating the returns on investments by family of business, electronics is at the low end of the scale. It’s been thoroughly studied,” Gray said.
He added, “Category killers are providing more intense competition. In order to meet their prices, it becomes almost a price war.”
Among Macy’s primary competitors in electronics are J&R Music World, The Wiz and Circuit City.
The electronics phaseout will commence in early May, and last about six weeks, Gray said. Most of the space will require remodeling, and so it will be several months before the areas are reassorted and reopened for business.
Of the 227,000 square feet in total space across Macy’s East devoted to electronics, most of the footage will be devoted to growing the home business, particularly home textiles, and women’s — primarily special sizes — and men’s wear. At Herald Square, it’s likely that the space will go to home merchandise, Gray said.
“The very high tech and rapidly changing electronics field — TVs, VCRs, stereos, CD players, PCs and similar items — involved major investments in dollars, management time and other resources that were out of proportion as contributors to Macy’s major mission,” explained Hal Kahn, chairman and chief executive officer of Macy’s East, a division of Federated Department Stores Inc., in a statement.
Asked about electronics being a magnet for people to shop other departments in the store, Gray replied, “Some people would argue that electronics is an attraction, that it draws people to the store and then they stop by other areas and buy other items in the store. We found that there wasn’t that much of a correlation.”
In addition, soft goods sales have recently been outpacing hard good sales in the U.S. Typically, strength in soft goods or hard goods run in cycles, around three years. However, Gray said, “That was not part of our equation. We’ve been studying this for a couple of years. Other Federated divisions have already exited electronics,” including Macy’s West three years ago and last year, Burdines and Bon Marche. Bloomingdale’s also dropped electronics several years ago, while Rich’s/Lazarus and Stern’s continue to sell electronics. The two divisions have no plans to discontinue electronics, according to a Federated spokeswoman.

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