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Hoping for green holiday, Macy's refashions itself

The venerable chain, building on its nostalgic appeal, is updating its operations to attract modern shoppers

December 22, 2009|By Andrea Chang

"Macy's is taking advantage of the recession. It's made some very tough decisions in terms of consolidating operations and streamlining its expense structure,"said Bill Dreher, senior retail analyst at Deutsche Bank Securities who recommends buying the stock. "We like these changes, and we like the direction the company is going."

Founded in New York in 1858, Macy's was acquired by Federated Department Stores in 1994, part of a buying spree that later included purchases of rivals Broadway Stores and May Department Stores. Two years ago the company officially changed its name to Macy's Inc.

Industry consolidation and failures in the 1980s and 1990s, along with the recent wipeout of regional retailers such as Mervyns and Gottschalks, have left Macy's and its 167,000 employees in an increasingly smaller pool, but that hasn't helped department stores in general.

Last month sales at department stores fell 4.7% compared with a year earlier, according to Thomson Reuters. In the retail segment of the economy, that drop made it the second-weakest sector in November after youth-oriented apparel sellers. With sales down 6.1% for the month, Macy's performed worse than department store peers Kohl's Corp., Nordstrom Inc. and J.C. Penney Co.

Other factors also leave the chain vulnerable.

As a mid-range department store carrying a wide selection of apparel, accessories and home decor items, Macy's aims to reach customers across all income levels. But even with seemingly nonstop coupons and markdowns, the chain has difficulty shaking its image as a pricey place to shop.

"Maybe if I had a full-time teaching job, I would shop at Macy's," said Jan La Joice, a substitute teacher from La Crescenta who was shopping at a JCPenney in Glendale recently.

For the holidays, the chain has ramped up its national "Believe" campaign, including a 30-minute animated television special and gift card give-aways.

"Part of the DNA of this brand is to really do all holidays well, but particularly Christmas," said Martine Reardon, Macy's executive vice president of marketing.

That's what drew Carla Cotti to the Macy's at Glendale Galleria recently when she was looking for trendy gifts for her grandchildren.

The senior housing consultant grew up shopping regularly at the department store but lately has broadened her options, making her visits to Macy's less frequent.

"With this economy, there's not a person who isn't going to make their way to a Costco or a Wal-Mart or a Target," she said. "But I still need Macy's."

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