...and I have some bad news about the Tooth Fairy too

Macy's reaching out to lure former Field's shoppers

By Sandra Jones
Tribune staff reporter

December 13, 2006

Macy's North is on the hunt for former Marshall Field's shoppers.

The Minneapolis-based division of Federated Department Stores Inc. is making phone calls, mailing letters, handing out $10 coupons and sending direct mail literature to customers who have not been shopping at the department store since it became Macy's.

"We're trying to find the people that were customers and didn't come back," said Frank Guzzetta, chairman of Macy's North division, in an interview. "That's a major strategy."

The division, comprising about 60 former Marshall Field's stores, has had a rough time since Macy's took over in September. The name change, a flood of unfamiliar merchandise and a shift in promotions have taken a toll on sales.

Shares of parent Federated, based in New York and Cincinnati, have tumbled 16 percent since late October to $38 as word spread of disappointing sales at the 400-plus stores, including Field's, that Federated purchased from May Department Stores Co. last year and converted to Macy's in September.

In the past two weeks two Wall Street analysts downgraded the stock to "hold" or "neutral," citing the drag the former May stores, which represent about half the company, are having on the total 836-store operation.

Banc of America Securities analyst Dana Cohen estimates that sales at the former May stores have declined between 7 percent and 11 percent from the year-ago period since the September conversion and fell 11 percent in November. The reason: Federated's move to quickly change the roughly dozen department store chains it acquired into Macy's jarred the customer, particularly in the Midwest, where Macy's is not well known.

"The key issue we are facing is that management miscalculated the impact of these changes and, potentially, the pace required to successfully execute them without seeing a big drop-off in the business," Cohen wrote in a report Monday.

Cohen predicts that problems related to the Macy's conversion will dog the retailer into next spring. She expects its strategy will eventually succeed.

Federated Chairman and Chief Executive Terry Lundgren is out to revive the department store as a place to shop. One chief reason for operating the giant chain under one banner, rather than a dozen nameplates, is to save money on advertising and marketing by running the same commercials and circulars nationwide.

While Macy's has kicked off its national campaign, it still needs to send separate messages to shoppers in the upper Midwest, where Macy's is new in town.

That's why Guzzetta is running a series of 17 newspaper ads in its three major markets--Chicago, Detroit and Minneapolis--aimed at reminding shoppers that Macy's still carries many of the items formerly found at Field's. The ads, running from Nov. 26 through Dec. 24, highlight separate products such as Waterford crystal, Dooney & Bourke handbags, Polo by Ralph Lauren and Frangos.

"We have a lot of autonomy," Guzzetta added. "The reason the division was created is so that we can stay close to the customer. We've developed a strategy of winning our customers back one at a time and making them understand who we are."

Guzzetta declined to comment specifically on sales, but said that when an area in the store is having trouble, he tracks down customers that used to shop there and seeks feedback.

Indeed, he has had an ongoing e-mail dialogue with one former Field's shopper who refuses to set foot in the store because he thinks it has changed too much.

"I said to him, `I hope you'll break down and buy something,'" Guzzetta said.

Retail consultant Keven Wilder predicts that shoppers have short memories and will eventually forget about the upheaval of Macy's first year in Chicago. But it is too late to do much about this holiday season, she said. Most retailers generate one-third of their sales during the holidays.

"They've made their decision," said Wilder. "They're going to have to ride it out. If Macy's can take a longer view and pack the store with fabulous merchandise, people will come back."

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smjones@tribune.com

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