REMAKING MACY’S EAST
Byline: David Moin
NEW YORK — The Macy’s merchandise machine is about to rev up again.
After months of flat sales and little distinction on the fashion racks, Harold D. Kahn, the forceful incoming chairman and chief executive officer of Macy’s East, says, “By August 1, we will open up a major statement for better contemporary sportswear.”
Kahn also told WWD that Macy’s private labels will be expanded to A&S and Jordan Marsh stores, while A&S moderate sportswear will seep into Macy’s as part of a blending of the best of both chains.
And buyers will be taking more risks.
The strategy for contemporary goods will involve “major floor space” at the Herald Square flagship, and possibly the other 20 or so “headquarter” stores — high volume units, such as those in Garden City, N.Y. and Paramus, N.J., catering to wide audiences.
Which contemporary labels and how much space hasn’t been determined yet, but the plan could mean a bigger play and possibly in-store shops for resources currently carried at Macy’s, such as Leon Max, Laundry, Parallel and Vivienne Tam. It could also mean the store will introduce items from the droves of designers not carried at Macy’s, and, Kahn noted, the mix might change more frequently.
“We are encouraging our buyers to be on the lookout to exploit core contemporary resources and up-and-coming talent,” Kahn said. “We are willing to take risks in pursuit of more fashion.”
Over the next 90 days, Kahn and his team will scrutinize “door by door, space by space” their $4.8 billion business, consisting of 96 Macy’s, A&S and Jordan Marsh stores, to learn where to expand moderate sportswear, a healthier business at A&S, and where to expand better sportswear, which is healthier at Macy’s. Customer demographics will be examined at each location.
“We are going to get through an analysis of the best of Macy’s and the best of Federated,” he said. “For a department store merchant, Macy’s East is where the action will be.”
Kahn’s strategies for next year call for:
l Rolling out Macy’s standout private labels to A&S and Jordan Marsh doors, including I.N.C., a Gap-like line of casual basics and fashion novelties; Jennifer Moore for knits and casual sportswear, and Charter Club for upper moderate classic item-driven sportswear.
l Bringing certain of Macy’s cosmetics, fine jewelry and housewares brands into A&S and Jordan Marsh doors, while folding Federated’s strengths — fashion jewelry, moderate sportswear and furniture — into Macy doors. That could lead to Macy’s fragrance launches happening simultaneously at A&S.
l Restoring more price credibility to Macy’s, and moving into more everyday low prices. The “high-low pricing game” he termed “suicide” in pre-markdown periods.
l Bringing more value to consumers.
No decision has been made on changing the name of A&S to Macy’s, Kahn said, but it seems likely, considering the blending of the merchandising and the temptation to develop a combined national advertising program that would be more cost effective.
In the nearer term, Macy’s East will continue to cut costs, and of the total of 250 buyers from A&S and Macy’s East, only 150 will remain after the merger. Federated expects to save over $50 million in expenses through the merger, beginning in fiscal 1996.
Federated Merchandising, led by Terry Lundgren, is now identifying core vendors and developing “partnerships,” but Kahn emphasized that Macy’s won’t turn into another May Department Stores Co., ruled by iron-clad centralized merchandising.
“This is not a matrix,” Kahn stressed, adding that Federated’s team buying approach has been de-emphasized. “This is core vendor intensification,” he said.
“Partnerships,” Federated executives have said, will enable Federated/Macy’s to get price breaks, product introductions and fresher merchandise sooner. In return, vendors get commitments to having as much merchandise as possible in the stores, enabling them to plan better and manufacture at lower costs.
Along with the core resource strategy comes “the question of how to layer on other elements,” such as private label, to set the stores apart from the pack, Kahn observed.
Macy’s East buyers, he explained, while shopping from the prescribed core vendor list, will still have latitude on how they edit the collections to suit regional tastes and climate differences. They will also shop resources not on the list, which Kahn said is subject to revisions annually. About 500 vendors represent over 70 percent of the volume at Federated.
Interviewed at Macy’s Herald Square headquarters, in the former office of his predecessor, Art Reiner, Kahn said he’s making plans for the Macy’s East/A&S business, but won’t actually run it until the merger is effective Dec. 30, and the old guard is completely gone.
Before getting down to it, he’s got to plug up some major holes in his senior management team.
“Our organization is just about set with the exception of sales promotion, and an executive vice president of better ready-to-wear,” Kahn said. “I would hope we would have those jobs filled in 35 to 40 days,” he said last week.
The ready-to-wear job is a big one, commanding a $600 million business across Macy’s East/A&S. A search is being conducted.
The team building process, meanwhile, hasn’t been all that smooth.
Joel Sneider had the rtw post and was offered the job at Macy’s East/A&S, but opted for a buyout of close to four times his annual salary. He said it was time for a change.
Burnett Donoho was named president of Macy’s East, but later decided to leave and take a buyout. He was succeeded by James Gray, former president of the Miami-based Burdines division of Federated.
Reportedly, some ex-Macy executives thought twice about working with Kahn, who is mercurial, tough and demanding. He is also described by many who have worked for him as one the most aggressive and probing merchants in retailing, able to exploit trends fully and determine which businesses the stores should be in or out of.
Kahn started his career at A&S 25 years ago, but is a Macy’s veteran. He joined Macy’s in 1975 and rose to senior vice president and general merchandise manager, at Macy’s New York. His next key post was president of the Atlanta division. He moved to San Francisco to head Macy’s California, but was pulled back to Atlanta in 1989 to merge the Atlanta divisionand the newly acquired Bullocks.
“He was very well regarded at Macy’s, but kicked around a bit with the mergers and dragged from coast to coast,” said a source, but Edward Finkelstein used him as his turnaround man.
After leaving Macy’s, he became president of Montgomery Ward, then last January returned to A&S as chairman and ceo to complete the A&S-Jordan Marsh merger.
He’s skilled in those situations, observers noted, and is apt to provide the combined A&S/Macy’s with a clear focus. “Shoppers should be able to read a department store like a magazine,” Kahn said.
Regarding the exodus of some Macy talent, Kahn pinned it on parachutes, which he described as “rare opportunities for some who lost money in the Macy’s LBO to walk away with as much money as if Macy’s went public.” The parachutes created “more disruption than I would have liked,” he admitted, adding, “This didn’t start out as a friendly takeover,” implying that some executives weren’t necessarily eager to work for Federated. Some may have wanted Macy’s to remain independent.
Still, “Hal Kahn is a maverick, and in the department store industry, there aren’t any,” said Carl Carro, partner in Executive Search Consultants International. “Typically in the old Macy’s, senior executives would have difficulty making the tough decisions because they were too close to the organization. Further organizational and operational efficiencies must be achieved or the merger will not be successful. That’s part of the pain in a merger, making the tough decisions and streamlining at all levels.”
Kahn, however, said another source, had a reputation for locking horns on occasion with Edward Finkelstein, former Macy chairman and ceo, and Bernard Brennan, chairman and ceo of Ward’s.
“It’s Hal Kahn’s way or no way at all, and sometimes you have to admire the guy for it,” said a former Macy executive.
Macy’s East will be under intense heat to maximize sales and bolster profits, considering the added debt Federated takes on by acquiring R.H. Macy & Co.
“Hal will do business in that kind of situation,” said Robert Kerson of Levy, Kerson and Aronson Associates, the executive search and consulting firm. “There’s a lot of pressure, but he’s an excellent choice. He knows how to drive a business and what sells.”