One on One with Federated`s CEO Terry Lundgren
Thursday, September 07, 2006
|
|
|
|
SUSIE GHARIB: It began as a single fancy dry goods store opened in New York City in 1858. This Saturday, Macy`s becomes the nation`s largest department store chain, with more than 850 stores in 45 states, the District of Columbia and Puerto Rico. The Macy`s nameplate will go up on more than 400 stores that have been operating under the Marshall Field`s, Filenes, and Robinson May`s brands, among others. To help integrate them, Macy`s parent company, Federated Department Stores, is also kicking off its first national advertising and marketing campaign. When I met with Federated`s CEO Terry Lundgren at Macy headquarters in New York, I asked him if he`s concerned he`ll lose customers because he`s eliminating some of America`s legendary retail names.
TERRY LUNDGREN, CHMN & CEO, FEDERATED DEPT. STORES: No, I`m looking forward to gaining customers. I mean obviously this was not made quickly in terms of our thought process and decision-making. (INAUDIBLE) stores have been attacked on all sides from lots of competition. What we`re trying to do is change, you know, our offering and change, you know, the demand for our products that we carry and sell. So that`s what this is all about and the opportunity to give us a national platform with national marketing, national scale. All add up to what we think is going to add customers to our current and existing base.
GHARIB: Terry, I understand that with this rebranding, in some malls, in something like 85 markets you`re going to end up with two Macy`s in the same mall. How are you going to handle that overlap?
LUNDGREN: Ninety nine percent of them will have different products in the two stores so it will be Macy`s home furnishings or Macy`s men`s store in one building, and then another building will be Macy`s women`s apparel and accessories and cosmetics in the other building. So there won`t be the same merchandise in both buildings. It will be catering to different customers.
GHARIB: Does this overlap, perhaps, create an opportunity for your Bloomingdale`s brand? Might you name some of those stores Bloomingdale`s instead?
LUNDGREN: Indeed. Bloomingdales is going from 36 stores to 41. And most of those new stores over the next year are all as a result of a acquiring May company locations.
GHARIBB: So Federated now is the largest national department store chain with 851 stores now. What is your growth strategy?
LUNDGREN: Our goal is to get comp store sales growth first and foremost. That is what we are trying to do here. We`re trying to fill our stores with exciting merchandise. More and more of that merchandise is becoming unique to us because we`re the primary seller of department store goods. So we`ll be the largest seller of Ralph Lauren products in America. We`ll be the largest seller of Mac cosmetics in America. And I go own to Coach handbags. I can go down the list of all these great bands and when customers think about what causes them to shop, it`s about the product. It`s first and foremost about the product and that`s what is going to drive them into our stores.
GHARIB: What about the discounters? They are continuing to upgrade their image with designer labels whether you are talking about Target or Chicos or Kohls that now is teaming up with Vera Wang. Are you concerned that those discounters are going to eat away at your market share?
LUNDGREN: This has been going on for a long, long time. And it will continue to go on. And what we have to continue to do is evolve. But ultimately again it doesn`t really matter what the name of the product is. There has to be the customer demand. In our case, I always look at supply and demand. And if a product is available everywhere, then it is really much less interesting to most consumers. But if you`ve got the right product and it is uniquely yours, that is a big draw and that is what we have in our stores.
GHARIB: Some people are saying that the business model of the all purpose department store doesn`t make sense in today`s marketplace. What are your thoughts on that?
LUNDGREN: Susie, I started in 1975. And I heard that same line back then. You know, and so I`m really not daunted by the task. I`m energized by it. I think that we have so much potential. You know, we`ve been -- all these stores that we talked about earlier. They are all about regionally advertising. And they have been trying to work hard to compete against all these national brands, these national discounters, and all these chains that have been coming in from all angles with a different type of an advantage. Well, now we have those advantages. Those advantages are no longer in the hands of others. They`re with us. And so when you put that together with the products that we stand for, which are clearly different than most of these other stores that we`ve talked about, I think that is going to be a magic combination. I`m really looking forward to the launch this Saturday.
GHARIB: Many kids across the country are going back to school this week. How would you characterize your back-to-school sale this season?
LUNDGREN: I think kids are waiting to go back to school to see what everybody else is wearing before they start shopping. And so more and more the back to school business used to be in early August. Definitely pushed into very late August, but into September as well. And so I think the story of back to school will be told, probably the combination of August and September sales. But as I said, overall August sales were very good, 3.8 percent comp store increase and was encouraging versus other retailers, so we were fine.
GHARIB: There is a lot of concern about consumers spending less given the high price of gasoline, higher interest rates. What do you see?
LUNDGREN: I don`t know exactly how that is going to play out. It certainly hasn`t impacted us to a large degree yet. But if it does have an impact on overall consumer spending, I do believe we`re in a unique position because of the change in marketing, the change of the stores, the excitement that`s going on, the parades we`re going to have in all these cities, all of this activity happening around us. I do believe it is a market share opportunity for Federated.
GHARIB: Now that you completed this grand strategy to make Macy`s a national brand, what is next?
LUNDGREN: Well, I do believe that at some point down the road, there will be room for an international expansion for Macy`s because this, part of this is the launch of this brand in a very big and powerful way. I don`t think there is going to be many households around the country, and even around the world in major cities that aren`t going to know the name Macy`s by the end of December of this year.
GHARIB: Terry, thank you so much. And good luck with the launch.
LUNDGREN: Thank you.
