FASHION MARKETING STRATEGY
MACY’S AND JC PENNY
SUBMITTED BY :-
ZAINAB LIMBDIWALA
MAYUKI BHASAK
NIHARIKA GROVER
POONAM KUMARI
ANSHIKA RAJWANSHI
Table of content :
MACY’S
1. INTRODUCTION TO MACY’S
2. HISTORY OF MACY’S
3. SITUATION ANAYLISIS AND INDUSTRY OVERVIEW FOR MACY’S
4. COMMERCIAL VISION AND PHILOSOPHY
5. MARKETING AND ADVERTISING
6. MARKETING STRATEGY
7. CUSTOMER PROFILE
8. ANALYSIS
COMPETITORS OVERVIEW
J C PENNY
1. INTRODUCTION TO JC PENNY
2. HISTORY OF JC PENNY
3. COMMERCIAL VISION
4. MARKETING
5. MARKETING STRATEG AND MEDIA PLAN
6. CUSTOMER PROFILE
7. ANALYSIS
SURVIVAL STRATEGIES FOR MACY’S AND JC PENNY
PERCEPTUAL MAPPING
MACY’S
INTRODUCTION & HISTORY
Macy's is a chain of mid-to-high range department stores headquartered in
Cincinnati, Ohio and New York, New York. Its selection of clothing merchandise can
vary significantly from location to location, resulting in the exclusive availability of
certain brands in only higher end stores. The company has designated additional
regional flagships but in major urban centers and operates a total of 800 U.S. stores
(as of January 30, 2010).
Macy's was founded in 1858 by Rowland Hussey Macy. On the company's first day
of business on October 28, 1858 sales totaled $11.06 (Approximately $287 in 2007
USD). Macy had established a dry goods store in downtown Haverhill,
Massachusetts in 1851 that initially served the mill industry employees of the area.
Macy moved to New York City and established a new store named "R. H. Macy &
Company" on the corner of 14th Street and 6th Avenue, later expanding to 18th
Street and Broadway, on the "Ladies' Mile", the 19th century elite shopping district,
where it remained for nearly forty years.
HISTORY
Macy’s has a long and rich history dating back to 1858 and its first store on 14 th
Street and 6th Avenue in New York City. After several unsuccessful retail ventures,
Rowland Hussey Macy launched what is now one of one of the most recognizable
department store brands. Macy’s grew from its meager beginnings into America’s
department store. In fact, the Macy’sbrand is ingrained into Americana. Since 1924
Macy’s name has been attached to the time honored tradition of the annual Macy’s
Thanksgiving Day Parade. Macy’s also played prominently in the movie "Miracle on
34th Street".
In 1994, Macy’s merged with Federated Department Stores creating the world’s
largest department store company. After the merger, Federated beagn operating
more than 850 department stores in 45 states under the names of Macy's,
Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, L.S. Ayres,
Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's and The Jones
Store.
SITUATION ANALYSIS
Over the last decade, Federated Department Stores has expanded the Macy’s brand
into select markets. Federated’s acquisitions and experiment of co-branding Macy’s
with regional nameplates has lead to the current effort – the complete conversion of
Federated department stores, with the exception of Bloomingdale’s, into the Macy’s
brand. This effort will be complete when approximately 400 May Department Stores
are converted to the Macy’s name in September of this year.
OVERVIEW OF INDUSTRY TRENDS
Department stores are in a period of decline and consolidation. Their relevancy has
waned as competition has increased. Department stores find themselves being - 2 -
forced to compete with discounters, luxury chains, specialty stores and Internet
outlets. They’re being squeezed from all side. A half a century ago, most department
stores were freestanding retail establishments offering one-stop shopping for
consumers. Over a short period of time, these flagship downtown department stores
would gradually give way to a new environment of retailing – the suburban shopping
mall. Today department stores “anchor” some 1200 suburban shopping malls and sit
side by side with a host of competitors.
Today’s department stores are an endangered species. In 1980 there were 35 major
department store chains. Today there are only 13 left. 1 In 1990, conventional
department stores accounted for 2.5% of total household income in America. A
decade later, their share had tumbled to 1.6%. 2 As a result of this contraction,
department stores have been forced to reinvent themselves or risk the prospects of
going out of business. Two distinct models of success for the beleaguered
department store industry have emerged.
The first is the “strong retail brand” approach. In this approach, department stores
have found success creating and promoting their in-house merchandise brands.
Assuming in-house brands reach a certain level of popularity, the department store
can promote itself and its brands as opposed to any individual third party brand
within. This approach has higher operating costs but can also produce higher
margins. The success of the Marks & Spencer label is an example of the strong retail
brand approach.
The second model for success is the “showcase” approach. In this approach, the
department store not only sells other brands, they leverage vendors of those brands
to take responsibility for an increasing part of the retail process. Department stores
have vendors active in stocking, staffing and other essential retail functions.
Showcase department stores often sell floor space. The key for showcase
department stores then becomes promoting the attraction of the shopping
experience. This approach may lead to lower margins but the tradeoff is lower
operating costs. A good example of the showcase model is Selfridges, which
positions itself as a retail theme-park.
CORPORATE VISION, PHILOSOPHY AND FINANCIAL OBJECTIVES
Corporate Vision
Macy’s, Inc. is a premier national retailer with iconic brands that each operate a
multichannel business involving outstanding stores and dynamic online sites. While
Macy’s and Bloomingdale’s are known worldwide, each has its own unique identity,
brand strategy, customer focus and business strategy.
Corporate Philosophy
Macy’s, Inc. clearly recognizes that the customer is paramount and that all actions
and strategies must be directed toward providing a localized merchandise offering
and shopping experience to targeted consumers through dynamic department stores
and online sites.
Aggressive implementation of the company’s customer-centric strategies, as well as
careful and thorough planning, will provide Macy’s, Inc.’s department stores with an
important competitive edge.
Macy’s, Inc. is committed to open and honest communications with employees,
shareholders, vendors, customers, financial analysts and the news media. The
company seeks to be proactive in sharing information and in keeping these key
stakeholder groups up-to-date on important and material developments.
At Macy’s, Inc., the greatest strength lies in the skill, judgment and talent of the
people. Every day a production of enormous magnitude takes place on the selling
floors and behind the scenes, where the company people bring the company’s
strategic goals to life. Their priority of attracting, retaining and growing the most
talented people in the retail industry has been and will continue to be their greatest
advantage.
Corporate Financial Objectives
The objectives of Macy’s, Inc. are:
To grow sales;
To continue to increase the company’s profitability levels (earnings before
interest, taxes, depreciation and amortization) as a percent of sales;
To improve Return on Invested Capital;
To maximize total shareholder return.
MARKETING/ADVERTISING
Multicultural marketing is a key element of Macy’s, Inc.’s business and diversity
strategies. Ongoing multicultural advertising campaigns are a way for the company
to tailor our brand messages and product offerings to our diverse customer
segments through targeted media. By communicating with our customers in the
manner they prefer and appreciate, Macy’s, Inc. is creating deep and lasting
relationships with our customers.
Macy's becomes a national brand
On February 21, 2006, Macy's appointed a new chief marketing officer, Anne
MacDonald, to oversee the transformation of Macy's into a "national department
store." By September 9, 2006, and after renaming the former May Company
locations, Macy's operated approximately 850 stores in the United States. To
promote its largest and most recent expansion, Macy's used a version of the Martha
and the Vandellas hit song, "Dancing in the Street", in its advertising. Also, the
company took props from its annual Thanksgiving Day parade to various re-labeled
stores throughout the nation, in what the company marketed as its "Parade on
Parade."
Macy's significantly increased its use of television advertising and product placement
in 2006 and 2007, using branding spots that featured the new Macy's star logo.
During the February 11, 2007, episode of the popular ABC television series
Desperate Housewives, a Macy's (under the fictional name McMay's) location in the
fictional city of Fairview was featured, a rare instance of product placement
promoting a department store chain in a scripted series. Nearly two years earlier,
one of the first national commercials for Macy's had aired during Desperate
Housewives, shortly after the conversion of Rich's, Lazarus, Goldsmith's, The Bon
Marché and Burdines.
The Macy's at Greenspoint Mall in Greenspoint, Houston, Texas was a Foley's until
2006.On February 27, 2007, Federated Department Stores announced plans to
change its corporate name from Federated Department Stores, Inc., to Macy's
Group, Inc. By March 28, the company further announced plans to convert its stock
ticker symbol from "FD" to "M", and revised its earlier proposed name change,
instead opting to change to Macy's, Inc. The change in corporate names was
approved by shareholders on May 18, 2007, and took effect on June 1, 2007. The
company will continue to operate stores under both the Macy's and Bloomingdale's
nameplates.
THE MACY’S BRAND. The Macy’s brand is one of its strongest assets. According to
Federated CEO Terry Lundgren “The Macy’s brand is one of the most recognizable
names in the retail department store industry”. From the movie "Miracle on 34 th
Street" to the Macy’s Thanksgiving Day Parade (the second most watched event
after the Super Bowl3), Macy’s has integrated itself into the cultural fabric of
America.
ECONOMIES OF SCALE. By converting many regional chains into the singular
Macy’s brand, Federated is expecting to realize greater economies of scale.
Redundancies will be eliminated and everyday business functions can be
streamlined.
PURCHASING POWER. One of Macy’s newfound strengths will be its size. In terms
of purchasing power, Macy’s may rival Wal-Mart in its ability to use sheer volume to
secure the best prices. Additionally, Macy’s will have greater leverage in making sure
that it secures the hottest merchandise.
MARKETING EFFICIENCIES. Macy’s, as a single entity, will allow Federated to
better focus on its core assets and implement marketing efficiencies through national
marketing campaigns. As opposed to splitting resources for regional campaigns,
Macy’s will be able to buy more national advertising.
MIX NEW WITH OLD CHANNELS. To compete with pure play internet retailers,
Macy’s is in the stronger position of being able to leverage the storefront and the
internet. Nationwide storefronts allow Macy’s to cross promote the internet with its
physical presence. Customers can research online at Macys.com and then come
into a store and buy. Customers can also buy items at Macys.com with the security
of knowing a return can be handled at the local store. This unique position allows
Macy’s a competitive advantage over internet only retailers.
TRANSITION PERIOD. In making a change from regional brands to the Macy’s
brand, there will be an inevitable transition period that presents both opportunities
and challenges. How Macy’s handles this initial transition period will be of the utmost
importance to the overall success or failure of this nationwide rollout. Macy’s must
learn from each rollout and continually improve. For instance, Macy’s should be keen
to evaluate the experience in Columbus, Ohio.
According to Scarborough Research, the number of customers walking into Macy’s
stores in the
Columbus area fell 4.5 percent after the name change from the regional Lazarus
brand. Customers are initially resistant to change and the transition period will
indeed serve to influence many customers’ first impression. If customers have a
negative initial experience, Macy’s will have difficulty erasing that perception.
LOSS OF REGIONAL’S BRAND VALUE. Customers have a relationship with their
regional department store. These regional have often spent many years and vast
resources cultivating their brand image and affixing it in their customers’ psyche. By
moving to a single national brand, Macy’s negates the regional’s’ established brand
value.
IMPERSONALITY OF A NATIONAL BRAND. Macy’s has to overcome the
perception that one size doesn’t fit all. Macy’s must realize that Manhattan isn’t small
town America. One of the benefits of the regional stores was the ability to serve
different markets with regionally appropriate products and experience. Macy’s must
do likewise and appeal to several distinct regional markets.
REPOSITIONING. Macy’s new strategy will be “affordable luxury” which will feature
new private labeled brands and brand-names such as Ralph Lauren, Jones New
York, Calvin Klein and Liz Claiborne. This “affordable luxury” strategy puts Macy’s
somewhere in the middle of the department store food chain. Retailers like Neiman
Marcus and Nordstrom have found success catering to affluent customers. And
discounters like Wal-Market have cornered the bargain hunters. Macy’s challenge is
to find a viable middle ground.
EVOLVING CUSTOMERS. The vast majority of customers have changed their
shopping habits. Today’s customers are more inclined to research a purchase
online, comparison shop and then visit a store. Today’s customers are well informed.
Macy’s must appeal to this 21st century shopper and meet their needs throughout
the entire customer lifecycle.
FIRST IMPRESSIONS. You only get one shot. Macy’s greatest opportunity in these
new markets will come in the form of a first impression. This first impression will have
significant impact on those loyal to their departed regional department store. These
new shoppers will come and judge the overall shopping experience and the
merchandise behind the Macy’s name. INFLUENCE. Stale merchandise has been a
significant problem for department stores. By in large, department stores haven’t
excited shoppers in some time. As a national store, Macy’s will have more influence
with suppliers.
If properly utilized, this newfound influence can bring in the latest must have
products and exclusive merchandise.
STEP OUT FROM THE PACK. In consolidating several regional’s into a single
national brand, Federated should be able to better distinguish the Macy’s brand.
Fewer names in the market will mean the Macy’s brand has a better opportunity to
stand out amongst a smaller crowd.
STRENGHTEN THE FINANCIAL HEALTH. The new acquisitions and transition to
Macy’s presents an opportunity to strengthen the financial health of Federated.
Macy’s size should allow it realize economies of scale. Operating costs have the
opportunity to decrease. And margins have the opportunity to and should increase.
THE SQUEEZE. Macy’s faces the continued threat of being squeezed from above,
below, by specialty shops, internet retailers and middle ground competitors like
Kohl’s. Should these competitive forces continue to erode Macy’s target markets,
Macy’s national strategy could be seriously jeopardized.
ECONOMY. Gas prices, higher interest rates, a stagnant stock market and fears of
terrorism could further contribute to the pain in the pocketbook of every day 5
consumers. Macy’s, as do all retailers, faces a real threat of an economic slowdown.
CUSTOMER PROFILE
Macy's to develop customer segmentation models
Macy's Inc. has signed an agreement with consumer insight firm DunnhumbyUSA to
analyze Macy's customer sales data, develop customer segmentation models and
work with Macy's to apply the learnings to accelerate future sales growth.
Under the multiyear agreement, Macy's will be DunnhumbyUSA's exclusive client in
the department store category.
The deal will support the My Macy's strategy, a locally driven merchandising initiative
meant to put the products customers want in the local Macy's stores they shop. The
My Macy's program was announced in February.
“Macy's now has this new organizational mode in 20 districts to improve the
assortment,” said Jim Sluzewski, a spokesman for Macy's. The deal with
DunnhumbyUSA “is an additional piece to that initiative of analyzing specific
customer data and reaching every customer in a way that is meaningful to her,” he
added.
The goal is to leverage knowledge of customer segments to drive same-store sales,
profitability, customer loyalty and, ultimately, shareholder value.
"For Macy's to continue to build a sustainable competitive advantage, we need to
fully understand our customers and mold our offering to satisfy each customer's
specific needs," said Terry J. Lundgren, president and CEO of Macy's, in a
statement.
In a separate announcement, Macy's reported same-store sales for the second
quarter ended August 2 declined 2.1%. Sales in the second quarter totaled $5.718
billion, a decrease of 3% compared with the same period last year.
Parties were hosted, sponsored major sporting events, toured the famous Macy’s
Thanksgiving Day Parade, triggered spontaneous dancing in the streets … and
made millions of customers very, very happy as we introduced Macy’s in a way they
had never before seen.” However, Macy’s same-store sales, while at first increasing
steadily, have decreased seven of the last eleven months in 2007. April through July
saw decreases in sales comparing the national Macy’s brand to the variety of brands
present in 2006. In September and October 2007, same-stores sales continued to
decline more than a year after unifying under the single Macy’s brand. The best
explanation for this decreases in same-store sales is that while Macy’s has focused
heavily on national branding and awareness, their efforts to get customers to
purchase goods in their local Macy’s have fallen short. (Klein Partners, 2007) Instead
of resorting to nationwide marketing campaigns and drastically cutting prices to
generate volume sales, Macy’s should focus more of its marketing efforts on focused
advertising at a local or targeted level. First, Macy’s introduced loyalty program
fortheir credit card holders to reward them for shopping and to send them special
coupons for merchandise they purchase. While this is a start, Macy’s should share
this customer information with their local store managers who can more effectively
reach their local customers. A flaw in Macy’s national marketing strategy is that it
cannot respond to localized market forces that a store manager may encounter. On
any given day, a local store manager may face competition from specialty stores or
other national retailers that are trying to increase sales with savings or coupons.
Store managers do not presently have any ability to reach their local communities to
counter changing inventory or prices. Like Wal-Mart, almost every Macy’s
advertisement warns the consumer in fine print that selection may vary at their
particular location.
Overall, the national branding of Macy’s appears to be a mixed result. On the one
hand, a national brand strategy allows Macy’s to compete on the national stage with
retailers like JC Penney, on the other hand, however, without allowing local
managers access to the power of the Macy’s brand, local managers cannot respond
to local conditions like inventory or the prices of competitors. Moreover, local
managers do not have the ability to target their best clients with tailored messages or
special offers only for their loyalty.
MARKETING STRATEGY
Macy’s, have implemented strong marketing plans to continue to grow and create a
unique and positive store experience for their customers in order to better satisfy
their needs and wants. By doing so, they have enhanced their ability to build their
brand equity and positive share of mind and heart. By properly employing these
strategies, each company can gain profits and sustainability for years to come.
Macy’s Inc., the nation’s largest department store chain, has found success in a
down economy—by shaping its products and marketing efforts to the local
consumer. “Given the difficult economic climate, we had an excellent quarter. Our
business improved progressively each month during the period and we are entering
the holiday selling season confident in our locally focused organizational structure,”
said Macy’s President Terry Lundgren in a recent statement. Although in-store sales
were down 4 percent compared to the same period in 2008, its online sales jumped
by 21 percent during the third quarter and 16 percent for the year. The economy has
not quite recovered, but Macy’s took the plunge and opened four additional stores in
Fresno, Calif.; Visalia, Calif.; Dallas- Fort Worth, Texas; and Kansas City, Mo.
Additionally, it reopened two stores near Houston that were closed due to Hurricane
Ike.
Financially, Macy’s did better than expected during the third quarter, with $489
million cash in its coffers, 63 percent higher than during the same period in 2008.
Macy’s operates 850 department stores in 45 states, including Guam and Puerto
Rico, a staggering increase in the number of stores from 424 in 2005.
Lundgren knows the economic problems in today’s market environment. Consumers
are more selective and are seeking bargains. To get customers through the door,
knowledge of consumer tastes, trends, and price consciousness has become the
mainstay of the retail sector. Macy’s has fine-tuned its customer orientation to the
point that it sent close to 700 different versions of its fall catalog to customers over
the past months. In the past, Macy’s sent one catalog for each season. The
department store hired market research firm dunnhumbyUSA LLC to track and
analyze sales data and develop a customer segmentation model. Despite releasing
lower second-quarter sales results and cutting its profit forecast for the rest of the
year, Macy's says the good news is that it's doing better than its competition. It also
says it will launch a new marketing approach and announced a new partnership, with
Dunnhumby.
While the British retailing consultancy may not be a familiar name to American
marketers, many observers credit Dunnhumby as a key factor in Tesco's success in
the UK. Macy's describes the deal as "a significant multi-year agreement," adding
that Macy's will be DunnhumbyUSA's exclusive department store client.
(DunnhumbyUSA is a joint venture between the British company and Kroger.)
DunnhumbyUSA will "analyze Macy's customer sales data, develop customer
segmentation models, and work with the Macy's organization" to increase sales,
Macy's says in its release. Meanwhile, Macy's released lower second-quarter results.
The company, which no longer reports monthly sales reports, says same-store sales
fell 2.1% in the quarter. Overall, sales slipped 3% to $5.72 billion.
"While we are never fully satisfied when sales are down," the company says in its
release, "we continued to outperform most of our major competitors in same-store
sales and to gain market share with a combination of differentiated merchandise,
current fashions and great value."
The company says it is launching an exclusive Tommy Hilfiger product which, will be
adding 275 FAO Schwarz toy shops in its stores, and is planning plenty of hoopla for
the brand's sesquicentennial in the third quarter. "The fourth quarter will follow with a
fresh approach to holiday marketing that we believe will be compelling to our
customers," it says.
Still, the company is lowering its outlook for the year. "The performance of the
economy and level of consumer confidence will have an important bearing on retail
sales in the second half of 2008, and thus it is difficult to forecast future results with
any level of certainty," it says, but is now predicting that same-store sales in the fall
season will be flat to down 1%, resulting in a decline of between 1% and 1.6% for the
full year.
The parade is just one of the many exclusive, grandiose events that have been a
significant part of the brand's marketing strategy over the years, extending its
presence in the community and thereby its special place in the cultural landscape.
The strategy follows the brand's logical philosophy: those more vibrant communities
provide better environments for its stores to do business, and for its employees and
customers to live and work. The event roster includes the Fourth of July Fireworks
Spectacular, fashion shows, cooking shows, numerous charitable events, and
elaborates in-store flower shows, where some 500,000 plants and flowers turn the
ground floor of the New York, San Francisco, Chicago and Minneapolis stores into
living gardens attracting more than 250,000 people to each location. And of course,
Macy's Christmas window displays are an event unto themselves. At the end of the
first Thanksgiving Day parade, Santa disembarked from his sleigh, climbed above
the Macy's marquee, unveiled the windows and declared that the holiday season had
begun. "The holiday windows are a highlight of the Christmas season, but day in and
day out, the windows are tied to our marketing strategy," says Patti Lee, senior VP
and general manager of Macy's Herald Square. "There's a bit of magic in retail and I
don't think Macy's has ever forgotten that," says Bob Brown, director of advertising
for the Las Vegas Review Journal and Sun. "When I was a kid, one of my first
impressions of Macy's was that it was where you went for Christmas shopping. And
even over the years as they have become one of my best clients and
I've...developed a close relationship with them, I always have in the back of my mind
that Macy's is where the magic began for me as a kid."
Under the multiyear agreement, Macy's will be DunnhumbyUSA's exclusive client in
the department store category.
The deal will support the My Macy's strategy, a locally driven merchandising initiative
meant to put the products customers want in the local Macy's stores they shop. The
My Macy's program was announced in February.2008
“Macy's now has this new organizational mode in 20 districts to improve the
assortment,” said Jim Sluzewski, a spokesman for Macy's. The deal with
DunnhumbyUSA “is an additional piece to that initiative of analyzing specific
customer data and reaching every customer in a way that is meaningful to her,” he
added.
The goal is to leverage knowledge of customer segments to drive same-store sales,
profitability, customer loyalty and, ultimately, shareholder value. For Macy's to
continue to build a sustainable competitive advantage, it is needed to fully
understand that customers and mold the offering to satisfy each customer's specific
needs, Macy's reported same-store sales for the second quarter ended August 2
declined 2.1%. Sales in the second quarter totaled $5.718 billion, a decrease of 3%
compared with the same period last year.
As a retail clothing giant, it is difficult for Macy’s to create points-of-difference when
competing with thousands of other clothing stores nationwide; however, Macy’s has
done just that. By implementing food vendors in their department stores, they are
able to better serve their consumers with a complete shopping experience since
“market research found that Macy's customers wanted more places to rest and
refresh quickly (Byron, 2004).” This is another way to provide a complete, unique
experience when shopping at Macy’s. Customers are able to spend more time
scanning clothes when they are completing refreshed. Most people, when hungry,
have to leave the store to buy a snack. By capitalizing on fully satisfying their
customers during the entire shopping experience, this creates a unique point-of-
difference when compared to other retail clothing departments. Macy’s tries to satisfy
all of the needs and wants of customers who step into its stores. Not only do they
offer quality products, they want customers to be able to enjoy a bite to eat as well.
This enables the customers to spend more time in each store and satisfies more of
their needs, instead of solely the act of purchasing clothing items. Macy’s competes
with other large department stores including JC Penny, Sears, Gottschalks, and
Nordstrom along with several other small boutiques.
Hierarchy-of-Effects Model
Awareness Knowledge Preference Liking Conviction Purchase
Cognitive Stage Affective Stage Behavior Stage
Analysis
Four basic mistakes are prevalent in the retail marketplace today. First, and most
serious, retailers ignore the relationship between the local store and the consumers.
This strategy creates strong brand awareness but results in national retailers saying,
“Shop at X.” Although national retailers may strive to attain uniformity across all their
retail locations, looking at Wal-Mart and Macy’s, both corporate bodies stress their
commitment to and understanding of the needs of local customers.
Many times, retailers only focus on communicating their brand message to the
consumer and to their local stores, forgetting the importance of the relationship
between the local retailer and the customer. This especially includes the national
brand ignoring the actual inventories or local preferences of a particular community.
From the case studies, this is a major flaw in Wal-Mart’s marketing plan. The
national retailer controls the message at every level allowing very little opportunity for
local flexibility. This has also been the new marketing strategy at Macy’s, which has
had mixed results. Only True Value does not follow the trend and has a strategy that
has the national brand augmenting the locally advertised message.
The second major mistake that retailers make is focusing on gimmick promotions
instead of targeted campaigns to get customers into their retail stores. From the case
studies, this is another symptom of Wal-Mart and Macy’s misguided marketing
strategies. Both offer “mega-sales” to cut prices that attract consumers looking for a
seemingly great bargain. However, in many cases, the number of items in inventory
is extremely low or there is a bait-and-switch element. In either case, neither of these
situations helps the store or brand effectively builds a relationship with the customer.
In fact, instead of fostering a relationship, the gimmick practice reinforces the idea
that a customer should only shop at a retailer because they have a special one-time
only deal. This undermines any brand building and drives retailers further into
gimmick promotions – a self-perpetuating situation that drives retailers into even
more difficulties. The third major mistake that retailers make is the overuse of
coupons to lower prices or present the customer with the appearance that they are
saving money or being granted a “good deal”. This is a mistake because coupons,
only when used correctly, are an incentive for consumers to purchase more goods.
Frequent coupons or sales only create a relationship with a customer in whom the
customer only purchases goods from a retailer when they receive a special offer or a
sale is running. This is especially a problem at Macy’s where sales volume can be
increased by offering multiple discounts. However, this can create a gimmick
situation where a customer has received many coupons but may only use one for a
purchase. Ultimately, coupons may only serve to reinforce the message that
retailers’ prices are too high and must be lowered to attract customers.
The fourth major mistake that retailers make is the lack of a relevant message in a
retailer’s local advertising. This is best exemplified by Wal-Mart and Macy’s; both
retailers have marketing strategies that focus on national brand awareness with
limited control of the marketing process by store managers. While brand awareness
is important to consumers, frequently, the mediums used in national campaigns have
seen reductions in their ability to reach consumers. Many television viewers,
especially those in the 18-34 demographic use TiVo to skip commercials. In addition,
many consumers listen to satellite or internet radio to avoid listening to commercials.
Finally, newspaper circulation has seen steady decline recently with an increase in
online news sources being used for primary newsgathering. In the coming years it
will be hard to dispute that traditional advertising mediums will yield a lesser return
on investment. Overall, through an analysis of Wal-Mart, Macy’s and True Value we
can see that all three claim to have the highest national priority placed on the local
success of each store, it appears only True Value has made significant strides in
establishing local relationships with customers. While Wal-Mart and Macy’s make
extravagant claims of locally focused retailing, they present little evidence besides
helping local charities to demonstrate their understanding of the community and
market they compete in.
It is also important to note that although these are only three examples, these trends
carry forth in general studies performed across retail chains in a variety of industries.
COMPETITION
Macy's direct competitors include other middle priced-ranged department stores
including JC Penny Nordstrom and Dillard's. However lately they have been losing a
significant amount of market share to discount stores such as TJ Maxx and
Marshalls due to the declining economy.
DISCOUNTERS. Discounters like Wal-Mart and warehouse retailers like Costco
compete head to head with Macy’s on Macy’s low end products.
LUXURY STORES. Luxury stores like Neiman Marcus and Nordstrom appeal to high
end shoppers by creating a desirable experience and offering exclusive
merchandise.
SPECIALTY STORES. Specialty stores focus on a more narrowly grouped set of
merchandise. For instance, Circuit City focuses specifically on consumer electronics.
MAILORDER. Mail order retailers like Crew, Plow and Hearth and Crutchfield offer
quality merchandise, competitive prices and arrive right or your doorstep.
PURE PLAY INTERNET RETAILERS. Pure play internet retailers like Amazon.com
and Buy.com are attacking nearly all department store merchandise lines with the
exception of private labels.
J C PENNEY
INTRODUCTION
As the nation's fourth largest retailer, J. C. Penney Company, Inc. earns more than
50 percent of its revenue in department store offerings, which include apparel,
accessories, and home furnishings. J. C. Penney also has the largest U.S. catalog
operation, which accounts for 13 percent of the company's revenue. Additionally, the
company owns the fourth largest U.S. drugstore chain, Eckerd Corporation, which
generates roughly one third of J. C. Penney's revenues. Topping off this ensemble,
J. C. Penney derives 3 percent of its revenue selling insurance, and the insurance
division continues to post record profits.
Under its "new models for profitable growth" philosophy, J. C. Penney wants to
capitalize on other proven money makers and cut back on under performers. After
closing 75 stores in the United States, the company plans on expanding its
international operations, which include stores in Puerto Rico, two stores in Mexico,
and one in Chile. J. C. Penney has also upgraded its fashion line and added more
private-label clothes to its mix. Like many other retailers, the company offered an
early retirement program and thinned out its management ranks, which is expected
to save $85 million annually.
HISTORY
Modern JCPenney stores are a far cry from the small dry-goods store that James
Cash Penney opened in Kemmerer, Wyoming in 1902. In those days, frontier miners
and farmers and their families turned to JCPenney for blue jeans and other work
clothes, shoes, fabrics and sewing needs. Today, busy working families turn to
JCPenney in cities, towns and suburbs and to jcp.com for affordable fashions and
home accessories.
Originally, Mr. Penney called his stores the Golden Rule because it was his personal
and business philosophy to treat others the way he himself would want to be treated.
In 1913, his growing chain of stores incorporated in Utah as the J. C. Penney
Company, Inc. and the Golden Rule name was phased out. In 1914, the Company
moved its headquarters from Salt Lake City to New York City to be closer to its major
sources of merchandise. Since 1992, the Company has been headquartered in
Plano, Texas.
As JCPenney grew, it became “A Nationwide Institution,” as one of its early logos
proclaimed. At one time, more than 2,000 JCPenney stores dotted Main Streets and
downtown shopping districts across America. After World War II, the Company
followed its customers into the new suburbs, and later into regional shopping malls.
The JCPenney catalog debuted in 1963, and in 1994, the forerunner of today’s
jcp.com began offering merchandise via the Internet.
JCPenney’s commitment to serving its customers with style, quality and smart prices
has led the Company through many transformations over the years as society and
shopping habits change.
CORPORATE VISION
Our vision for growth is to become America’s shopping destination for discovering
great styles at compelling prices. To support this vision we have updated our Long
Range Plan to guide our actions over the next five years
Long-Range Plan Fact Sheet- mission
2010-2014
JCPenney’s vision for growth is to be America’s shopping destination for discovering
great styles at compelling prices. Currently, JCPenney does business with over half
of the households in America each year. We’re focused on getting those customers
to spend more with us, while also finding ways to engage the other half to
experience our great style and quality at smart prices. To do this, we are focused on
a Long-Range Plan consisting of four integrated business strategies intended to
drive profitable sales growth, enhance our financial performance and achieve
industry leadership:
Brand-expansion strategies
This kind of cross-channel synergy can also prove helpful during the launch of
private-label or exclusive brands, something JCPenney is featuring more of these
days.
Using a synchronized approach across channels "is how we launch a brand today,"
says Last, pointing to the introduction earlier this year of JCPenney's new fashion-
forward lingerie concept Ambrielle as an example. In addition to in-store, print and
electronic-media elements of the launch, "the Internet was the underlying hub that
tied the pieces together," Last explains. An Ambrielle microsite features ads for the
brand, links to product and a bra-fit tool.
Another way of converting in-store shoppers to JCP.com is through a feature
recently introduced that enables an online shopper to determine whether a desired
item is in stock in a selected size or color at a nearby store.
None of this is to suggest that JCPenney doesn't still value its direct mail heritage.
While JCPenney has been reducing its direct mail circulation over the past few years
in favor of less-costly e-mail communication with customers, it still drops more than
70 catalogs yearly, including one of the few remaining Big Book catalogs, available
upon request. In 2006, the company's catalog sales were also over $1 billion.
However, that number is down from a reported high of $4 billion in the late 1990s.
In addition to JCP.com, JCPenney is focused on the Internet because the chain is
also pursuing a strategy of introducing more smaller, off-mall stores.
Smaller stores, bigger footprint
JCPenney is planning to add 250 new stores by 2011, nearly 80 percent of which will
be in off-mall locations.
The stores typically are on one level, come in at around 100,000 square feet and
feature wide aisles and central checkouts to enable customers to come and go
quickly. The company has reported that its off-mall stores average $250 in sales per
square foot compared to $160 per square foot for all JCPenney's stores. However,
since they won't be able to offer the full assortment of merchandise found in a larger
store or even online, programs like the one in the infant department and tools like the
new point-of-sale terminals with Internet access will help bridge that gap.
Of course, none of this would mean anything if JCPenney's merchandise assortment
and marketing message weren't hitting the mark with customers.
"Being the leader and knowing our customers is essential because it's the basis for
everything that we do," Mike Boylson, JCPenney's executive VP/CMO, said during
the company's analyst meeting in April. He added that the company's "customer
intelligence, data, insight, measurement tools, scorecards, customer-file
management and purchase behavior is a strategic advantage that is hard to
replicate."
For example, mining its wealth of data, the company recently tested making
customer selections for its direct mail campaigns based on who would drive the most
profitable sales, not who was most likely to respond. Results have been positive,
with higher total sales.
To gain further customer understanding, JCPenney last year combined its
intelligence with data about how consumers feel about brands from Saatchi &
Saatchi, the chain's new agency of record, to try to connect on a more emotional
level with customers. The strategy bore its first fruit in recent weeks with a targeted
approach, launching an integrated marketing campaign intended to extend the
multichannel merchant's emotional connection to kids and teens. This latest
campaign follows the spring launch of JCPenney's new tagline, "Every Day Matters,"
and an accompanying marketing campaign.
JC PENNEY’S MARKETING FUNNEL
clearly the logic and marketing approaches that successful large retailers can utilize
to more efficiently fine tune their campaigns. First he outlined the key benefits of
direct mail in a marketing mix, and those aspects that complement other branches of
a campaign.
Specifically, he touched upon the use of their own customer data, to sort of outline
their strategy for them. By looking at patterns and segmentating customers into
either “profiles” or just “behavioral groups”, JC Penney is able to serve the most
personalized ad (or shopping experience) po ssible.
Direct mail is very important to us because it’s through versioning and through
customer segmentation we are able to send out very targeted messages that are
highly accountable. We are able to track our results in direct mail to a degree that we
can’t do in a lot of our more traditional mass media.
This strategy is as clear as day, and makes a great deal of sense. Essentially, the
steps are 1) use Mass Media (TV, radio, consumer direct mail) to attract / acquire
customers then 2) Use targeted media (email, social media, targeted/variable direct
mail) to build loyalty and increase revenue with those acquired customers. The
intangible thing that the outbound mass media provides is that it reinforces the brand
image with current customers – hard to track, but always a plus.
MARKETING STRATEGY AND MEDIA PLAN
The media plan of JC Penney has some strong points and some weaknesses . The
strengths are that the advertisements endeavor to position JC Penney as a fashion
store . On the other hand there are some media tactics that detract from the
positioning it hopes to achieve . What is proposed is that JC Penney should desist
from using techniques that do not support its overall marketing strategy . On the
other hand the media mix and communications strategy of JC Penney should be
focused more on positioning the company as a fashionable company (Muldoon . K ,
2006 . Finally , metrics should be developed to monitor the implementation and
effectiveness of the media plan . The marketing strategy of JC Penney is to target
middle level consumers . Its pricing strategy does not target the premium segment
like some of its competitors like Marcy 's , Dillard 's , and Belk , nor does it focus on
discount store customers like Wal-Mart . The direct competitors of JC Penney are
Kohl 's and Sears . In addition , the distribution strategy of JC Penney stores is to
locate the stores in suburban malls . This strategy is a change from the traditional
strategy of locating the JC Penney stores in downtown area . Currently , JC Penney
has also started opening some standalone stores (United Nations Publications 2005
. At the same time , JC Penney has started selling its products on the
internet . JC Penney has been particularly successful in selling furnishings and
apparel through the internet . It has emerged as one of the most successful ``hybrid
' internet marketers . Its sales crossed the 1 billion mark in 2005 . As far at the
product strategy of JC Penney is concerned it has started concentrating on brands
like Arizona Jeans , Worthington , and St . John 's Bay . JC Penney has moved
away from its drug stores business by selling off its Eckerd division .
In addition , the strategy of JC Penney is to develop reposition itself as a premium
store . It sponsored the surfing star Thomson to support a proprietary brand ,
entered a joint venture with Sephora and a premium casual wear brand for women
Studio . A part of the marketing strategy of JC Penney is to launch its back to the
school campaign in which school children are targeted . As a part of this campaign
JC Penney is trying to move up its image on the premium dimension by offering
brands like Miss Bisou , Levis , South Pole , and Fang . In addition , JC Penney is
selling school uniforms in partnership with IZOD . JC Penney promises to take care
of special size needs of uniforms . The premium denim for the back to the school
segment is buttressed by Young Men 's .
5-year turnaround plan: apparel program credited with producing results
PLANO, TEXAS -- Progress in reviving JCPenney stores upon entering year three of
a five-year turnaround plan remains on track, with the chain noting its second
consecutive gain last year in comparable-store sales, despite tough competition and
a stubborn economy.
Enhanced marketing, the rollout of a more energized store look, centralized buying
and improvements in trendright merchandising all helped to grow comps 2.6% in
2002.
"Clearly our performance last year showed we are back in the game. We're building
real points of difference we believe between us and our competitors," said Vanessa
Castagna, evp and ceo for JCPenney stores, catalog and Internet.
Speaking at the company's two-day analyst meeting last month, Castagna said
JCPenney's mission is to be the dominant mall-based retailer of fashion at moderate
prices. That requires on-target and timely interpretation of trends, which is happening
due in part to centralized buying, she said.
Further, JCPenney's strategy involves emphasizing points of differentiation from
competitors through exclusive brands and dominant businesses.
JCPenney intends to grow categories in which it has a dominant market share
position, including window coverings, home, intimate apparel, fine jewelry, men's
suits and special sizes in apparel. A mix of fashionable national, exclusive and
private brands serves as another differentiator for the chain.
The recently launched exclusive Bisou Bisou brand in contemporary sportswear is
one example of how JCPenney is offering fashion at a value. Another is The
Havanera Co., a newly added private label in men's contemporary casuals that
targets Hispanic males.
"We want to be first and we want our customers to trust us for trend-right
merchandise," explained Lana Cain Krauter, evp and gmm in men's and children's
apparel.
Changes in the store look that began last year with centralized checkouts, improved
visuals, use of high-capacity fixtures and "hot spots" to emphasis key items are
making an impact, according to executives. Meanwhile, JCPenney recently exited its
unprofitable cosmetics business and is replacing that with expanded assortments in
fragrances, bath and body, women's accessories and fashion jewelry in this "center
core" area.
Behind the scenes, the company is benefiting from technology upgrades and a
transition to an internally operated distribution network that supports its new
centralized model. Expense control has been another emphasis, including changes
in staffing adapted to store traffic.
As for JCPenney's catalog business, revival has proved more challenging. This $2.6
billion segment declined 22% in sales, while Internet sales grew 18% to $381 million.
Changes in the catalog division include the addition of smaller targeted supplements,
improving the assortments, pricing and graphics of existing books and
implementation of new payment policies to cut back on returns and enhance profits.
Though a sales decline of up to 10% is forecast this year, the division expects a
rebound in 2004.
JCPenney ceo Allen Questrom said the company is committed to the catalog
business, which provides another point of differentiation.
In fact, the retailer's three-channel shopping via stores, catalogs or the Internet will
be promoted more going forward.
"We do not give up on things, and we do not change strategy every time the wind
blows the wrong direction," Questrom said.
And despite hype about the death of mall retailing, Questrom said he is convinced
JCPenney will continue to grow, with the majority of its 1,049 department stores
located in malls. Interestingly enough, however, JCPenney this year will open three
freestanding stores as a test, perhaps in response to the strong gains made by
retailers like Kohl's.
Meanwhile, aggressive marketing efforts will continue to drive traffic into stores.
Advertising spending will increase up to 10% this year, with plans to add new
commercials that better promote the personalities of its key brands, such as Arizona
in juniors.
Despite gains on several initiatives, JCPenney executives remain conservative in
their outlook, given the tough economy. The retailer is forecasting a 2% gain in
comps this year, though sales so far have been soft. Comps declined 2.1% in
February and 5.5% in March. Executives are highly optimistic, and convinced the
company is heading in the right direction.
"We've really come a long way in the last two years," said Castagna. "We know our
strategy works."
At least one analyst was skeptical, however, as to JCPenney's ability longer term to
compete against formidable off-mall players that include Kohl's, Target and Wal-
Mart.
"Over the past two years, JCPenney department stores have been a bright spot in
broadlines retailing, with comps that outshined department store competitors," wrote
Deborah Weinswig, an analyst for Smith Barney. "However, after missing its comp
plan for the past three months, we feel that the department stores have lost their
luster and are no longer bolstering investor confidence in JCPenney stock."
Recent sales weakness may be due in part to increased competition and improved
merchandise offerings among discounters targeting the moderate customer,
Weinswig added.
CUSTOMER PROFILE
Customer profile based on “Missing Middle” Strategy
The driving force behind Penney’s decision to focus on the Missing Middle comes
from research the retailer did to define/understand its target customer better.
According to JC Penney, the Missing Middle customer is:
Female
Age 35 – 54
$69K household income
married, with kids
seeks stylish, but not too trendy casual clothes
wants high-quality, form-fitting clothes that aren’t too tight
To serve the Missing Middle market, Penney’s is working with well-known designer
Nicole Miller on an exclusive line of moderately priced and more than moderately
stylish casual woman’s clothes. Penney’s has also added exclusive home
furnishings from Chris Madden and Colin Cowie.
With private label goods comprising 4% of company sales, Penney’s is introducing a
new private label band, “W – Work to Weekend” to better serve the Missing
Middle audience.
These efforts to fine-tune its retailing strategy reflect the latest phase in a four year
revitalization plan. Results so far have been positive for JC Penney as third-quarter
earnings grew 86% and January year-over-year sales rose 3.3%.
JCPenney Transforms Catalog Strategy to Better Serve Customer Preferences
PLANO, Texas (Nov. 18, 2009) – As part of its effort to continually adapt its
marketing strategies to meet evolving customer preferences, J. C. Penney
Company, Inc. (NYSE:JCP) has taken steps to further reshape the way it engages
with customers through an integrated marketing approach that incorporates stores,
catalogs, online applications and emerging digital marketing platforms, including
social media.
Increasingly, catalog shopping has converged with online and in-store shopping as
customers view catalogs as “look books” and inspiration sources for their in-store
and online purchases. In response to this convergence and the ongoing migration of
customers to shopping online, JCPenney will no longer publish its twice-yearly “big
book” catalogs and will dedicate those resources to a range of customized, more
timely specialty catalogs, continued targeted growth initiatives on jcp.com and
ongoing leading-edge digital media services.
The discontinuation of "big book" catalogs aligns with JCPenney's ongoing
commitment to promote the sustainability of forests and other natural resources, and
builds upon its legacy of operating in an ethical and socially responsible manner. The
Company anticipates a year-over-year reduction of 25 to 30 percent in paper used
for catalogs in 2010 – continuing a four-year trend of declining paper consumption.
“To ensure we are keeping pace with consumers’ changing media habits and
continued migration to online versus catalog shopping, we have increased our
investments in new technologies, as well as successfully integrated the
merchandising and marketing teams serving stores, jcp.com and catalog into one
enterprise-wide team that is able to consistently and seamlessly serve our
customers, no matter how they prefer to shop with us,” said Myron E. (Mike) Ullman,
III, chairman and chief executive officer. “Part of this transformation is the refocusing
of our catalog operation to smaller, more targeted publications, providing us with a
strategic opportunity to continue reducing our overall paper consumption and
transportation-related environmental impacts. We remain committed to constantly
analyzing the impact of our overall environmental footprint and upholding the
principles and discipline that have helped sustain and build JCPenney into a trusted
brand for over 100 years."
Highlights of JCPenney’s Direct-to-Consumer Marketing Evolution
“We are constantly evolving our marketing approach to capitalize on new
technologies and customization strategies that allow us to be in more frequent and
effective contact with our customers,” said Mike Boylson, executive vice president
and chief marketing officer. “Big book catalogs have become less relevant as
customers have embraced shopping online, where they have ready access to our
entire assortment at any time on jcp.com, one of the nation's largest general
merchandise sites on the Internet. At the same time, customers greatly appreciate
the smaller, more personalized catalogs we have introduced as well as digital and
mobile applications that make it easier, more convenient and fun to shop with us.”
Ongoing Growth of jcp.com and Digital Outreach: As JCPenney’s largest, most
dynamic store, jcp.com is one of the largest general merchandise sites on the
Internet, with more than 250,000 merchandise offerings and millions of opt-in e-mail
subscribers. Additionally, JCPenney has developed a range of digital marketing
initiatives, such as an iPhone application launched this year and presence on social
media sites such as Facebook, where JCPenney has so far amassed a following of
more than half a million fans.
Broad Array of Specialty Catalogs: A roster of specialty catalogs includes a range of
home catalogs to support JCPenney’s leadership in home lines, such as “Rooms
Babies Love” and the cooks® catalogs; the “Little Red Book” publications for
women’s apparel and accessories; and “Matters of Style” for men. Other popular
catalogs, including the Christmas catalog, will continue.
SURVIVAL STRATEGIES FOR MACY'S AND PENNEY'S,
The stores' strategies vary. So do their prospects for success. Much depends on
how vulnerable they are in the first place.
Specialty apparel stores are struggling, too. Even though some clothing, especially
for growing kids or for career women, is regarded as essential, sales figures suggest
that many of those purchases was being postponed to cut the cost for added stock
during the recession period.
"The retailers accept that we're in a recession — smack in the middle of it," Riley
says.
Among the most visible ways that stores tried to ease their pain from the spending
slowdown:
•Merchandise. Retailers must take care not to stock too little of the latest hot fashion
or product — or showcase it too late. Many stores,
•Pricing. Even retailers that try to avoid across-the-board price slashing are
embracing the deep discounting trend, which Wal-Mart capitalized on so successfully
last fall and holiday season.
•More consumer input. Retailers can't afford to wait until the end of a season to
determine which trends will prove most popular. Stores are stepping up consumer
research and using their websites to gather real-time opinions from shoppers.
Thanks to luck, foresight or a bit of both, some retailers are better positioned to
manage a downturn. Those with low, low prices — think Wal-Mart and off-price
retailers including T.J. Maxx— and those that cater to the wealthy are tending to
outperform those in the middle.
But opportunities exist for midlevel retailers, too. If shoppers are trading down to
Wal-Mart, as its sales suggest, then more affluent people may be ready to cut back
on their Bloomingdale's trips in favor of Kohl's. Tough economic times tend to
diminish loyalty to stores across the spectrum.
"In this type of economy, the super shoppers get coupons out and check things
online; they're going to be loyal to themselves first," says Phil Rest of the consumer
insights firm BIG research. "Everyone's trying to find ways to make their money go
as far as they can so there's something left for things they really want."
Christopher Maddox of Washington, D.C., says he's not giving up on Macy's , one of
his favorite retailers, but is being far more cautious about his purchases this year.
"I'm only buying essentials due to the economy," Maddox says. "Luxury and big-
ticket items are not in my budget due to increased costs of gas, food and utilities."
What follows is a look at the strategies of four retailers — Target, J.C. Penney,
Macy's and Neiman Marcus — that draw from often-overlapping segments of
shoppers.
As they brace for a possible recession, these stores are re-examining, in particular,
four areas that will be most evident to shoppers: inventory, staffing, store openings
and promotions.
J.C. Penney
Damn the economic naysayers, J.C. Penney is designing its most ambitious five-
year plan for store openings in its history and last week oversaw its largest-ever
merchandise launch. Still, facing a persistent drop in consumer spending, CEO Mike
Ullman says the chain is scaling back those store openings from 50 to 36 this year
and will adjust its inventories to reduce the need for hefty markdowns.
Ullman hopes that Ralph Lauren's new American Living fashion, home and footwear
line for men, women and kids will further invigorate the Penney brand, which has
drawn more and younger customers with the addition of the Sephora makeup line
and two private-label lingerie lines designed, in part, to compete with Victoria's
Secret. The American Living line will be found in 600 of the chain's 1,000 stores,
often with its own in-store shops.
Deutsche Bank senior retail analyst Bill Dreher questions whether now is a good
time for Penney to launch a line that's about 25% higher-priced than similar
merchandise already in its stores.
Under the deal, Ralph Lauren's name won't appear anywhere on the new
merchandise or displays, Dreher notes. Kohl's, by contrast, was able to connect the
Lauren name with its Chaps line for many years, which helped keep customers
aware of the connection. The new line is "no panacea," he says.
Still, Dreher notes, Penney has successfully reinvented itself over the past decade
from a chain known for "dowdy, older-lady-type fashions to one that's very much hip,
on-trend and cool." More recently, Penney has recognized that its catalog business
is less important now than its website, he says.
About six months ago, Penney decided to merge its store, catalog and online
marketing operations; the change will result in 100 to 200 job losses. Ullman insists
it's "not a cost-driven exercise," but rather one that'll give shoppers "one view of our
merchandise."
Macy's
The nation's largest department store chain concedes that the economic slowdown
has forced it to put off plans to scale back its sales and promotions.
"We still believe the strategy is a good one, but the timing not necessarily good,"
says CEO Terry Lundgren.
In 2006, Macy's said it was trying to wean customers off frequent sales in favor of its
"Every Day Value" pricing. Though Lundgren says there were slightly fewer
promotions in 2007 than in 2006, he says Macy's won't reduce the timing or the
number of sales until consumer spending starts to bounce back.
All the great deals now in stores are one benefit of the depressing economic news,
says Marietta Landon of Cambridge, Mass. She finds sales everywhere she goes.
"Especially Macy's — they make every weekend a sale with saving passes and
advertising galore," Landon says.
Macy's says its plan, announced earlier this month, to eliminate 2,300 management
jobs in the company's central office and create 250 new ones in its local markets
wasn't necessarily driven by the economy. But saving about $100 million a year sure
doesn't hurt. The plan to localize decision-making "was conceived long before there
was talk of a credit crunch or mortgage crisis, but executing it now in the face of a
possible recession does have its benefits," says Macy's spokesman Jim Sluzewski.
The addition of Tommy-Hilfiger-branded men's and women's apparel this fall, which
will make Macy's the only place to buy the brand in the USA outside of Hilfiger
stores, should further boost sales, he says.
Macy's has also announced plans to close nine poor-performing stores this year.
Though struggling with some of the same issues that its rival J.C. Penney faces in
catering to the middle class, Macy's holds an advantageous position, says Phil Rist
of BIGresearch. That's because Macy's enjoys the image of being something of a
novelty in many areas since it renamed the former May department stores in the fall
of 2006.
Its clientele is generally more affluent than Penney's, notes analyst Bill Dreher. Still,
in times like this, even a Macy's will likely be hurt by the tendency of customers to cut
back on non-essentials.
"All the department stores are vulnerable because they are about 80% apparel and
20% home goods," Dreher says. "After years of strong apparel sales, customers
have full closets, and with.
Direct Competitor Comparison MDD
S
PV
T1
SK
S
Ind
ustr
y
Market Cap:10.
30B
1.83
BN/A
1.45
B
17.8
5B
Employees:
161
,00
0
29,3
23
154,
0001
9,67
2
154.
00K
Qtrly Rev Growth (yoy):7.2
0%
-
2.40
%
N/A5.10
%
11.7
0%
Revenue (ttm):24.
24B
6.17
B
17.5
6B1
2.70
B
21.2
7B
Gross Margin (ttm):
40.
90
%
35.7
0%N/A
39.2
1%
39.2
1%
EBITDA (ttm):2.9
0B
529.
07MN/A
188.
99M
2.73
B
Operating Margin (ttm):7.1
0%
4.37
%N/A
2.39
%
10.0
0%
Net Income (ttm):
601
.00
M
143.
19M
251.
00M1
-
11.7
4M
N/A
EPS (ttm):1.4
11.99 N/A
-
0.083.30
P/E (ttm):17.
25
13.8
8N/A N/A
13.5
2
PEG (5 yr expected):1.4
22.47 N/A
17.1
1
17.1
1
P/S (ttm):0.4
20.27 N/A 0.52 0.84
DDS = Dillard's Inc.
Pvt1 = J. C. Penney Corporation, Inc. (privately held)
SKS = Saks Incorporated