Macy’s CEO: New Concept Good Fit For Kenwood Collection



Macy’s CEO Terry Lundgren said Bluemercury, the retailer’s newly-acquired, beauty and spa concept might be a good fit for Kenwood Collection.

To help Macy’s grow sales, the retailer plans to open 14 new stores by the end of the year. Macy’s bought the 63-store chain in February for $200 million as a potential growth vehicle.

Lundgren said outdoor venues like the mixed-use development in Sycamore Township are the type retail spaces Macy’s has in mind for Bluemercury.

“That’s a good possibility,” Lundgren said, adding Bluemercury’s expansion strategy is to avoid malls but open in outdoor lifestyle centers and upscale neighborhood shopping areas.

Kenwood Collection’s owner Phillips Edison & Co. has signed High-end furniture seller Mitchell Gold and Bob Williams as its first retail tenant for the development that will have 260,000 square feet for retail use. Phillips Edison officials were not immediately available for comment Friday.

Bluemercury will be rolled out in major metropolitan areas – possibly including Cincinnati, Lundgren said. Bluemercury will also add mini departments at its regular department stores and its merchandize will also be added to Macy’s online offerings.

Lundgren expressed great enthusiasm for Bluemercury’s potential, noting cosmetics rival Sephora has more than 1,600 specialty stores nationwide.

Based in Washington, D.C., most Bluemercury locations include in-house spas, while the stores carry well-known, high-end luxury beauty brands, as well as M-61, a proprietary skincare brand. The stores offer personalized assistance from a team of beauty experts with a high level of technical product knowledge.

Lundgren stressed Macy’s is nurturing the Bluemercury concept even as it begins to ramp it up. He noted co-founders Marla and Barry Beck remain in charge of the division and report directly to him.

Lundgren’s comments were during a Friday press conference following Macy’s annual shareholder meeting where he outlined the company’s success and future growth plans.

Macy’s executives have talked more about growing the company’s sales in 2015 after years of steady sales growth that came as the retailer strengthened profitability.

Bluemercury was Macy’s first acquisition in a decade. Early this month, Macy’s also announced it will open four Macy’s Backstage – an off-price concept aimed at competing with Nordstrom Rack and TJ Maxx.

Lundgren said Macy’s will study and fine-tune its off-price stores before expanding the concept elsewhere.

Macy’s CEO Clues Us In To What’s Coming Out of a Cool New San Francisco Office


Cincinnati-based retail giant Macy’s Inc. recently opened a new tech-friendly office space in Silicon Valley, and it’s already producing new technology for the company.

Macy’s CEO Terry Lundgren highlighted the new office location during the company’s annual meeting in Cincinnati on Friday.

“You have to do that if you want to attract the new technology guys and gals who are doing this so well for us,” Lundgren told investors.

The Courier’s sister paper in San Francisco has more details about the office, but Lundgren highlighted a piece of new technology that’s already been produced from it: an app that allows consumers to take photos of products they see out in the world and be directed to that very product, or something similar that Macy’s sells online.

That app was born from what the company calls the Macy’s Idea Lab. Ordinary employees in the San Francisco office will get together in small groups to brainstorm ideas or solve a problem. Those ideas will be pitched to a management “shark tank” and the winners will be sent to a tech team to develop a prototype and then send out to consumers to get feedback.

The image search app was developed based on a question posed to employees: if you had another way of finding a product, what would it be?

“It’s not always perfect either, but it’s out there. It’s done,” Lundgren told reporters after the annual meeting. “We think a lot is going to come out of (that office) in the future.”

Lundgren spent the meeting catching investors up on the company’s recent progress, much of which was discussed during the company’s first quarter earnings call on May 13. The Courier outlined seven initiatives presented during that call that Macy’s Chief Financial Officer Karen Hoguet said will drive much of the company’s growth in the future.

Those include initiatives like the recently announced off-price Macy’s Backstage stores, four of which are being piloted in New York. Lundgren told reporters that he expects rapid expansion of the concept once they get the specifics right at the piloted stores. Macy’s Backstage stores will open in the spring, but any expansion will likely halt around Nov. 1 as the retailer prepares for the holiday season, he said.

“There’s really no limitation to how fast we can grow it, other than the available real estate and the talent,” Lundgren said.

The expansion of the recently acquired high end beauty products and spa services retailer Bluemercury was also on Lundgren’s mind. There are currently 63 Bluemercury stores, with plans on adding an additional 14 this year. Macy’s will add Bluemercury counters at some of its own stores, but Lundgren wouldn’t say which, or when a freestanding Bluemercury would come to Cincinnati.

“We have a lot of excitement at our company and we’re moving very fast and were very focused on multiple efforts and we think we can juggle these balls at the same time,” he said.

Why Don’t Millennials Want to Shop at Macy’s?


Macy’s has a couple of real problems. It is trying to figure out who its customer is and why they shop in such different ways. The other problem is that they do not understand the millennials, who are now coming of age and have significant spending power. These young people are the future of retailing – and they clearly do not want to shop in department stores.

Millennials feel that shopping in department stores is a chore. It is dull and unexciting. Sadly the stores do not help themselves – the theatre is gone, replaced by sale signs, and there is little encouragement to linger. I think there should be coffee bars in every store – it does not have to be Starbucks, it could be Illy or Senor Valdez—there has to be a place to linger and meet friends. When shopping for apparel, the millennials shop by consensus, and they have to have a place to rest.

While shopping in department stores is boring, cool brands like Nike have found ways to create an engaging experience for young people in their stores. For example, Nike introduced the NAC Club (Nike Athletic Club) in its stores, where actual exercises are done in the store. It may be disruptive, but it is also fun. At one time, Home Depot had kids build a bird feeding station in their stores. It bought teen-agers and their parents into the store–everybody had fun and the proud feeling of building something themselves. Department stores have to challenge themselves to create experiences young people enjoy. Maybe stores should devote an evening to honor a singer, dancer or musician that would encourage more visitors the stores. I am excited to see the development of Macy’s Backstage this coming fall. I believe it is patterned after Nordstrom’s Rack, a successful off-price chain that is rapidly expanding throughout the United States. However, this doesn’t solve the problems the full line store is experiencing.

We are dealing with a period of deflation of apparel – which I think will get worse when Primark enters the US. H&M and Forever 21 are already driving down prices and making life difficult for the teen retailers such as Abercrombie and Aeropostale. This downward price pressure will on get worse as these fast fashion retailers continue their aggressive expansion by taking space in empty stores with their attractive and cheap wares. The constant promotion of apparel in department stores masks the fact that most merchandise is overpriced and has to be on sale to be priced properly. Recently handbags, shoes and accessories were an easy substitute for purchases of dresses and separates. But now those reliable categories are saturated. Too many closets now have too many handbags and shoes.

On Macy’s first quarter earnings conference call, CFO Karen Hoguet, gave a litany of reasons why the company missed their sales targets. They reported a drop of 0.7%; including lease departments the drop was 0.1%. The first reason was the strong dollar, which discouraged foreign visitors to shop aggressively in cities like New York, Chicago, Las Vegas and San Francisco. It appears the Russians are not traveling to the US because of internal political problems, and the Chinese are feeling the impact of an economic slowdown. The European, Japanese Brazilian and other countries already slowed over the last two years. The strength of the US dollar has made it more expensive to visit America for many foreign travelers.

The second reason cited for the sales slowdown was that the company is on a learning curve regarding how to handle the omnichannel environment. That may be tough to explain, but the company announced that some of their better stores will have an assortment of better merchandise – they are trading up. That should be interesting, since it will again require reorientation and infusion of selling staff in order to make the quality customer feel more welcome among the heavily promoted mostly private labels at Macy’s. On the selling floor, Macy’s has been squeezing the lemon dry, now management has to be realistic and retrain their associates to give better, more caring, service.

The third reason given for the missed sales targets was the slowdown of the ports on the West Coast. This affected all retailers. Probably Macy’s a little more, because of the Bloomingdale stores. Mrs. Hoguet said that customers missed the deep discounts on merchandise that came from the Western ports. Bloomingdale’s extended their friends and family off-price event in order to capture these missed sales. I can’t help thinking that maybe less merchandise headed for the markdown racks would be a good thing, but Mrs. Hoguet indicated otherwise blaming less inventory for lower sales.

The fact that General Merchandise, Apparel and Footwear (GAF) sales were lower than expected was cited as a fourth reason for the shortfall. That is a fact, millennials are not buying as much apparel – in fact, this group in general disdains ownership.

Finally, as a fifth factor Mrs. Hoguet cited the weather. Sadly, the year before we also had brutal weather and while I hope, 2015/16 will be better, I am pessimistic that the cycle will turn that quickly. It was a terrible winter, but customers shopped for what they needed – especially mattresses and furniture, and they also purchased active wear. They bought what they needed, having a strong weather driven disincentive to just go shopping.

Macy’s management has excellent merchants. They must open their eyes to the possibilities and opportunities that only a dominant retailer like Macy’s has. They must find new ways to make the customer comfortable and welcome.  In my opinion, going upscale is not the answer for Macy’s. Taking a realistic look at the number of sale events and recognizing that a) most customers no longer believe the sale signs; b) everybody is now invited to every “friend and family” event; and c) couponing will not build a healthy business well positioned for long term growth.  This is what Macy’s really needs to do.

For the record, Macy’s had a disappointing quarter. As a result of the below plan sales, the company exited the quarter with too much inventory (+2.7%).  This makes for a difficult road ahead. Macy’s management believes that it can achieve its earnings projection of $4.70 to $4.80.  I hope so. The trick will be to do so without squeezing the lemon even harder by cutting more staff.