Macy's: State St. store 'doing badly'

The parent company of Macy's acknowledged Friday that its State Street department store, flagship of the former Marshall Field's chain, is "doing badly."


Since replacing the green Field's awnings across the upper Midwest with the Macy's name and red star in September, Federated Department Stores Inc. has been on a mission to win over Chicago-area shoppers, many of whom were attached to the hometown Field's brand and unfamiliar with Macy's.

Federated executives have suggested at times that they were struggling with the transition, but the company does not break out revenue figures for individual stores or chains under its very large corporate umbrella. This week the company said it was disappointed with sales at the roughly dozen regional department store chains the company converted to Macy's eight months ago.

At a press conference after its annual meeting here Friday, Federated's chief financial officer, Karen Hoguet, said former Field's stores are performing no worse or better than the roughly 400 regional department stores Federated acquired from St. Louis-based May Department Stores Co. in 2005 and converted to Macy's.

But there is an exception: the Chicago store on State Street.

The landmark store, long a tourist destination, is "doing badly," Hoguet said, without providing specific performance data..

Macy's hasn't been doing enough to drive traffic to the store, she said, something the retailer is working to change.

This weekend Macy's is advertising 50 percent discounts on clearance merchandise at the State Street store only and total savings of 60 percent to 90 percent on thousands of spring fashions.

The promotion is part of a broader move, announced this week, to step up advertising and sale events at former May stores to boost sales.

Chairman and Chief Executive Terry Lundgren was quick to interject that operating a Midwest flagship in Chicago remains core to Macy's strategy.

"We're very committed to that store," said Lundgren, noting that rival Carson Pirie Scott a few blocks south closed its flagship store earlier this year. New owner Bon-Ton Stores decided the giant emporium was too costly to operate.

On Wednesday Lundgren characterized the former May stores' sales performance as "disappointing," as Federated missed its first-quarter sales target and earned less than Wall Street had expected.

Analysts estimate the sales drop at former May stores averaged 7 percent to 10 percent.

Sales at all Federated stores open at least a year, a key measure of a retailer's health, rose 0.6 percent, well below the increase of 2.5 percent to 3.5 percent Federated had predicted in February for the first quarter. The former May stores account for about half of Macy's approximately 800 stores.

Lundgren explained the sales miss by saying that he threw too many changes at the former May stores too quickly, namely lots of new in-house merchandise and fewer promotions.

The arrival later this year of the Martha Stewart Collection for the home, made exclusively for Macy's, should bring more shoppers to the stores, Lundgren said. Home goods account for about 15 percent of Federated's sales. The business has been "challenging" lately, he said, as people delay buying new homes.

At the meeting, shareholders approved changing Federated's corporate name to Macy's Inc. effective June 1. The change is intended to boost awareness of the Macy's name. Macy's accounts for 90 percent of Federated's business. Bloomingdale's makes up the rest.

Federated's board also declared a 2 percent increase in the quarterly dividend, to 13 cents per share.

Lundgren reiterated after the meeting that Federated is close to a decision to move Frango mint production to Chicago. Lundgren pledged to Mayor Richard Daley after Federated acquired Marshall Field's and changed its name to Macy's that he would try to return some of the famous chocolate-mint production to Chicago.
Source : http://www.chicagotribune.com