CINCINNATI — Federated likes a lot about what it sees in the Marshall Field’s chain, said Terry Lundgren, Federated’s chairman, president and chief executive officer.
“It’s a great company,’’ Lundgren said at Federated’s annual shareholders meeting here Friday. “I’ve admired them for a long time.’’
The two retailers share similarities in store size, customer service and the quality of merchandise, though “we walk away from 90 percent of the ones [acquisitions] we look at,‘’ he said. “It has to just make a lot of sense for us and be right. It has to make sense for our employees, our shareholders and our customers.’’
Target officially put up for sale both its Mervyn’s and Marshall Field’s divisions in March. Federated is not interested in Mervyn’s stores, Lundgren said.
Federated this month reported one of its strongest quarters in a decade, with same-store sales up 6.9 percent. Federated also raised its same-store sales expectations for fiscal 2004 to between 3 and 4 percent.
Lundgren attributed Federated’s strong showing to several factors: a four-point program to enhance the overall shopping experience, improve its merchandise mix, simplify pricing and hone marketing strategies.
He was less sure about the impact of a strengthening economy on Federated’s strong performance. “It’s improving, but it’s very fickle,’’ Lundgren said. “To look at the financial markets you wouldn’t know we have a strengthened economy.”
The fashion-conscious consumer may deserve the most credit of all for Federated’s windfall. “The fashion customer is back following a period of drought,” he said.
During the past three years, a national recession had induced consumers to rein in their purse strings. But the current crop of bright, fresh fashions is encouraging shoppers to loosen their grip as the economy grows.
“Fashion is an optional purchase, and I think customers traded down over the last couple of years,” Lundgren said. “Today, when consumers are looking for fashion, it’s just not in their closet” and they’re being forced to head for the mall.
Lundgren cited a repositioned Charter Club ready-to-wear line, private brand initiatives such as Tasso Elba, I.N.C and Alfani, and new collections from Jones New York Signature, Lauren by Ralph Lauren, Calvin Klein and a soon-to-be-introduced collection from Michael Kors as reflections of that fashion-orientation.
The deflationary apparel environment of the past several years is similarly pushing the move toward better, more fashion-focused brands because consumers can purchase better-quality merchandise without spending more, he said.
Although basic apparel items have been selling well at Federated, as at other stores, Lundgren sees fashion as the force behind the recent upturn in performance. “Fashion’s back not just for us, but some of the other better stores are doing well,” he said. In keeping with that trend, Federated has been scaling back its moderate lines, emphasizing better sportswear and focusing on private label and exclusive brands. It will continue to do so.
A handful of humorous new TV spots showcased at the meeting underscored the optimism of Lundgren and Federated. The four spots, which support Macy’s recently launched Way to Shop campaign, were aired in Atlanta, Boston, San Diego and Cincinnati last quarter. More ads are in the works and will be rolled out to additional markets on a division-by-division basis starting this summer.