Federated’s Macy’s is reinventing home

Carole Sloan, May 24, 2004

Cincinnati — Federated will use three stores to 'reinvent the whole home store,' Terry Lundgren, chairman, president and CEO, said after the company’s annual shareholders meeting here.

He declined to identify the three stores, but said that they will be in place by Oct. 15. This 'reinvention' would be used to reverse a slump in home sales throughout the company, with the exclusion of Bloomingdale’s, over the past several years.

But he cautioned the market that this reinvention would be something that would need time to perfect. 'We don’t expect to get it completely right the first time,' said Lundgren.

His comments referred to the Macy’s business; Bloomingdale’s has had strong home and apparel business in the last year.

Home textiles and luggage are the only home store businesses posting increases at Federated. Overall, the home store is the only part of the store with sales declines, Lundgren said.

He reiterated that home’s poor performance led management to move to the central Macy’s Home Store approach.

Driving the home textiles business, Lundgren said, 'is our Hotel private brand, which is off the charts. It’s the most expensive part of our assortment, and the highest quality.' The Hotel towel, at $24.99 to 29.99, is the company’s best-selling towel, he said. 'It’s selling like it’s our opening price point,' added Lundgren.

The Hotel sheets are 'unbelievable' and range from 250-count to 460-count all cotton, as well as a two-ply 400-count woven, he said.

Charter Club is the company’s biggest home textile brand, Lundgren said, 'and we see we can trade it up to a Pima towel from the $9.99 one that we have.'

'The success of Hotel and Charter Club encourages us as to where we can go higher from here in private brands,' he related. Moving up is an important goal of the new Macy’s Home Store organization, which is expected to follow a path upward, parallel to the ready-to-wear business.

But changes in home product will take until the end of 2005, because of the need to first get the complete organization in place and develop the programs. Today, he said, 80 percent of the organization is in place and located at 11 Penn Plaza, New York.

In apparel, the company has moved to bring in new names, but because of the change to the Macy’s Home Store format, these can’t be done in home yet. The move upwards and toward more private brands means that, 'Something has to go, and that is more moderate price points that are broadly distributed,' said Lundgren.

Another reason for the change to Macy’s Home Store was that, 'We weren’t doing it in home,' he said. 'There was a sameness in merchandise, especially in housewares and tabletop.'

With a new organization, there will be less autonomy in merchandise and marketing than in apparel. Stores and management will be held accountable, Lundgren emphasized. The more universal approach in home, he said, 'is different from apparel, where California’s needs are markedly different from Atlanta. It’s not the same as home, where a blender is a blender.'

'The Macy’s Home Store will allow for faster decisions, one point of view, and allow us to acquire complete product runs,' Lundgren related.

While he was enthusiastic about the Medina Temple Bloomingdale’s home store in downtown Chicago, Lundgren said, this approach 'is less of a proven business. The other Bloomingdale’s home stores in Las Vegas and Oakbrook, Ill., are too soon to tell in terms of moving ahead.'

The company has opened home stores in Aventura Mall in Florida and Dadeland Florida, and in several Macy’s West units where home and men’s are combined. This typically is where the company has two boxes in the same mall, he said. 'I really like home textiles, housewares and tabletop in the main store. I like those businesses to drive traffic.'

Discussing marketing and the simplification of pricing and promotions, Lundgren said, 'We will always be a promotions department store. And home furnishings, no matter how you cut it, is a promotional business.'

Overall, the Macy’s nameplate divisions already have cut promotional activity 20 percent 'and there’s more room to reduce this,' he said, adding that Macy’s East is more promotional than Macy’s West.

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