Shoppers show they're starting to accept Macy's

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Mark Lennihan, Associated Press
A woman shops at Macy's flagship New York City store last month. A study found that one of the reasons Midwesterners have shown a reluctance to adopt Macy's is the perception that, because of its New York roots, its prices are higher.
Click photo for larger image.

Department store shoppers have been addicted to clipping coupons for decades. Asking them to break that old habit hasn't been easy for Macy's owner Federated Department Stores.

The Cincinnati-based department store giant is both cutting back on mass coupon distribution in favor of offers sent directly to its most loyal customers and trimming promotional sales in favor of touting everyday values.

"This is probably the most challenging of all the issues we face," Karen Hoguet, Federated's chief financial officer, told analysts yesterday during a discussion of the company's fourth-quarter financial results.

Last year was a tumultuous one for Federated as it re-named and re-merchandised former rival May Department Store's chains, such as Kaufmann's, Filene's and Marshall Fields. The department store company yesterday reported net income rose 5 percent in the holiday quarter despite a 4.3 percent dip in sales.

Part of the problem earlier last year: The company underestimated how long it would take employees and customers to learn how to shop in the new environment. Sales at former May stores continue to lag those of the more established Macy's locations.

But sometime in mid-December, those sales at former Kaufmann's and other May stores started picking up. "We're seeing improvement in all parts of the business. I really think it's just time," said Ms. Hoguet. "It does take time for people to absorb change."

Federated's corporate culture seems to embrace change, an image reinforced yesterday by the announcement that shareholders would be asked to approve changing the company's name to Macy's Group Inc.

The move, which would go into effect in June, would consign to history the Federated handle that came into being in 1929. According to the company's Web site, the Federated Department Stores moniker was created by combining Abraham & Straus of Brooklyn, Filene's of Boston, F&R Lazarus & Co. of Columbus, Ohio, and Bloomingdale's of New York.

With the company's new strategy of building a single brand coast-to-coast, most of those names have been eliminated, although Bloomingdale's continues as an upscale chain.

Names, however, are easier to change than shopping habits. That's why Macy's hasn't gone cold turkey on mass coupon runs in the newspaper and weekend sales, longtime department store staples.

But it has been cutting back. "They have as an organization been trying consciously to pare back those events," said Mary Brett Whitfield, senior vice president with Retail Forward in Columbus, Ohio.

She noted another department store chain, Dillard's, made a similar move several years ago with mixed success. Chains such as Nordstrom and Wal-Mart have trained their customers not to expect one-day sales and promotions, bringing them in with other tactics.

While shoppers can accept new strategies from a retailer, "it does require a consistent marketing effort over time," said Ms. Whitfield.

Macy's is working on it, teaching consumers that certain items around the store always are available at a value price and working to get its credit cards into former May customers' hands. Cardholders still receive coupons in the mail.

It's not just consumers who need to learn a new system. Former May employees took awhile to absorb the new owner's private label brands and policies. Now, Ms. Hoguet said, they are more willing to tell their customers, "This is a great value. You don't need a coupon."

She said Federated's strategy of offering customers a wider range of choices -- the good, better, best selection -- has struck a chord. The average retail price per unit sold in former May locations is up.

Looking ahead, Federated is projecting sales in existing stores will rise 2 to 3.5 percent in the coming fiscal year, the first in which its acquired locations' results are mixed in with its legacy Macy's sites.

The re-education of the consumer will continue as will the remodeling of former May stores. All stores have been formatted to include wider aisles and signs have gone up to help customers find new departments, said a Macy's Midwest spokesman. In the region, both the Downtown store and the Robinson location are scheduled to get enhanced fitting rooms and restrooms later this spring, he said.

Meanwhile, for those shoppers who need the thrill of the deal that a steady stream of promotions and sales provide, Ms. Whitfield said competitors such as J.C. Penney and Kohl's stand ready to serve as they try to siphon off former Kaufmann's customers.

M. Spencer Green, Associated Press
Federated Chairman Terry Lundgren, with Macy's executives Frank Guzzetta, left, and Ralph Hughes, right, addresses a gathering last spring in Chicago where he announced that Marshall Field's store would be renamed Macy's.
Click photo for larger image.

Teresa F. Lindeman can be reached at tlindeman@post-gazette.com or at 412-263-2018.


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