Byline: Kristin Young

LOS ANGELES — Federated Department Stores is planning to spend another $15 million to convert 18 former Liberty House stores in Hawaii and Guam into Macy’s West units, raising the estimated total cost of the project to between $65 million and $75 million.
“It is extremely important to us to make a proper investment in these stores despite the economic downturn,” said Jeremiah J. Sullivan, chairman and chief executive officer of the San Francisco-based chain who recently returned from the islands to officially change the banners.
Federated acquired Liberty House last July nearly four months after the Hawaiian chain emerged from Chapter 11. Terms of the deal were never disclosed, but analysts pegged the price at about $200 million.
Liberty House is expected to tack on at least $275 million in sales to Macy’s West’s $4.6 billion annual revenues.
Macy’s West is sprucing up everything from fixtures, signs and other visual details in 12 of the department stores. The stores range from 37,000 square feet to over 300,000 square feet in size. One by one, the stores will get new departments and inventory. There are also six Liberty House stores in the resort format, from 1,000 to 3,000 square feet in size. Some are in hotel lobbies. Macy’s West is considering using these smaller sites to test new products or operate gift outposts.
Perhaps the most visible changes are in the largest former Liberty House store, the 327,000-square-foot site at the Ala Moana Center in Honolulu. Sullivan said Ala Moana was one of the “top three or four shopping centers in the country, if not the world.” The mall averages $889 per square foot in sales.
Macy’s had to “beg, borrow and steal” to get merchandise into stores by Thanksgiving and get an early read on customer preferences there, Sullivan said, noting about $10 million worth of inventory, some taken from other Macy’s stores, was brought into the store.
The shoe department was doubled in size to 8,000 square feet. And Macy’s introduced its Impulse department, with contemporary vendors such as Max Studio and BCBG Max Azria, to the store as well as the career private label brand Alfani and Benefit cosmetics.
“Ala Moana today is 70 percent of what we think it should look like,” he said. “The other stores are only about 20 to 30 percent and really won’t look exactly how we want them until we get first-quarter receipts.”
Changes are also under way at the Waikiki store on the island of Oahu. Macy’s added Impulse and INC departments, Kenneth Cole for Men’s and a sunglass shop.
One big challenge is the Hawaiian economy. “It is suffering. There’s no question of that,” Sullivan said, noting tourism from the U.S. mainland is off 13 percent while Japanese tourism is down 50 percent. “Let’s say 85 percent of the business is local and 15 percent is tourist. The number-one priority is to get the assortment right for the local consumers — buying island-related merchandise.”
Macy’s is experimenting with local buyers focusing on merchandise made in Hawaii. It’s the only market in the Macy’s division to do so. Some local vendors are Tori Richards, Reyn’s Spooner, Hawaiian Style and Young Hawaii. With Liberty House, Macy’s West currently operates 137 units in the Southwest and Western regions in the U.S., Hawaii and Guam.
Sullivan is also gathering information from the Hawaii stores for data that could be useful to Macy’s stores in Southern California and desert locations. “Without tipping our hand, it is some of the casual and beachwear looks that we’re experimenting with in our stores,” he said. As for whether Hawaiian vendors will ever show up in stores on the mainland, “We’re going to do a touch of it, but it’s not going to be massive,” said Sullivan.

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