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MAY 8, 2008

Macy’s merger still muddled
But company officials say it’s all a matter of strategy.
By Tiffany Montgomery

When the parent companies of Macy’s and Robinsons-May merged nearly three years ago, Macy’s – with its 13 locations – became the dominant mall-based department store in Orange County.

Some argue that it’s unclear if the marriage is a success. Macy’s sometimes resembles a discounter and promotes coupons similar to Robinsons-May. Other times, it emphasizes designer goods.

When the stores merged, many Robinsons-May shoppers fled to lower-priced department stores, such as JC Penney, as the old locations converted to Macy’s, which offers higher-priced goods. But, oftentimes, the high-end shoppers Macy’s hoped to attract favored upscale Nordstrom or the store’s luxury cousin, Bloomingdale’s. So, Macy’s got stuck in the middle, and retail experts say its marketing message is muddied.

But Macy’s spokesman Jim Sluzewski says the two-pronged strategy is by design. The price promotions drive shoppers into stores, while national advertising campaigns featuring designer goods reinforce Macy’s brand image. (For example, Macy’s recently struck a deal with Tommy Hilfiger, making the department store the exclusive retailer for the designer brand starting this fall.)

Shaheen Sadeghi, owner of The Lab and The Camp shopping hubs in Costa Mesa, predicts Macy’s will continue entering into exclusive alliances, and he thinks other large retailers will follow.

Indeed, Sluzewski says, Macy’s wants to carry merchandise that shoppers won’t find anywhere else. Arrangements with big-name design houses, such as Tommy Hilfiger and Martha Stewart, will differentiate Macy’s from other department stores.

If success is in the numbers, however, it’s difficult to judge where Macy’s stands. It’s a tough time for the retail industry. Same-store sales (sales at stores open more than one year) show that in 2006, Macy’s figures rose 4.4 percent, compared to the previous year. In 2007, the figures fell 1.3 percent. Now, Macy’s forecasts same-store sales will be down 1 percent or up 1.5 percent for 2008.

“We are left with an entity that is performing not quite as well as hoped, but is performing sufficiently well,” says Kurt Barnard, president of Barnard’s Retail Consulting Group in Nutley, N.J. “Some of the expectations were unrealistic. The sky also caved in on retail over the past few years, when consumers decided not to spend money.” OCM

Tiffany Montgomery is OC METRO Business Magazine’s retail columnist.