A national chain focuses on local links

Across the country, Macy's is ringing in this Christmas with local flavor, from Elvis ornaments in Tennessee to Texas-themed martini glasses.

These 2,200 themed ornaments and other decor sold locally for the holidays are vivid examples of how Macy's Inc.'s chief executive officer, Terry J. Lundgren, is looking to harness the magic of the storied 152-year-old department-store chain this Christmas and beyond.

Since its 2005 merger with May Department Store Co.'s various regional nameplates, Lundgren has ditched names such as Strawbridge & Clothier and Marshall Field's to convert most stores to one national Macy's brand.

But the Cincinnati-based chain's latest shift emphasizes local stores' roots by tailoring merchandise to local markets, he says.

Shoppers are now finding conservative suits in Washington, D.C., and large-size cookware in Utah to cater to larger families, for example. The strategy, rolled out last year to all its stores, has 1,600 district managers in 69 regional districts overseeing merchandise assortments in no more than 12 stores each.

Lundgren, a 35-year retail veteran, conceived of the changes, dubbed "My Macy's," as consumer spending was slowing three years ago. The move has helped the nation's second-largest department-store chain after Sears Holdings Corp. outperform competitors.

Lundgren expects the local strategy to help revenue at stores open at least a year rise as much as 3.5 percent in the second half of 2010 compared with the year before.

The company Wednesday reported a profit of $10 million in the third quarter compared with a $35 million loss in the same quarter last year. Revenue rose 6.6 percent to $5.6 billion. It said it had benefited from the move to put merchandising decisions closer to customers at all its stores.

Lundgren is also focusing on the chain's exclusive brands to help differentiate it from competitors. For the back-to-school season, Macy's launched its Material Girl fashion collection, created by pop star Madonna and her daughter, Lourdes, which has been a home run.

That teen collection enhances Macy's portfolio of celebrity brands, which include Martha Stewart's home-furnishings collection, Donald Trump's ties, and Tommy Hilfiger sportswear. Forty-two percent of its revenue comes from exclusive brands or store labels, Lundgren says.

Lundgren became CEO of Macy's former parent, Federated Department Stores Inc., in 2003. Two years later, he spearheaded the $17 billion acquisition of May, giving the company more than 800 stores.

Macy's did away with May's regional nameplates, including Strawbridge & Clothier in the Philadelphia area, causing some anger among shoppers who lost their favorite local store. But Lundgren held steadfast.

He said Macy's, which reported $23.5 billion in revenue in its latest fiscal year, was not only holding on to existing shoppers but also was grabbing more from rivals.

Lundgren said he drew the "My Macy's" strategy from his experience as a china buyer in the 1970s at the former Bullock's chain, where he used to load up Lennox plates in his car trunk and travel to 18 stores in Southern California.

He was asked the biggest lesson the 2007-09 recession taught him.

"We just quickly knew there wasn't going to be a quick response to the consumer and that this was the time to make major changes," he said. "As we come out of this period . . . we are clearly benefiting.

These are among the localized offerings at the nine Macy's stores in the Philadelphia area.

Sportswear: Collections featuring Eagles, Flyers,

and 76ers gear.

Candy: Made by Asher's Chocolates,

of Souderton,

Montgomery County.

Cosmestics: Added the Philosophy, Origins,

and Angel Fragrance brands, at local customers' request.

Clothing sizes: Adjusted, based on local requests.

SOURCE: Macy's Inc.EndText