As Marshall Field's signs fall, Federated about to find out if shoppers' threats, anger real
Macy's red star is rising in Chicago.
The department store chain's red-and-black logo is going up on Marshall Field's stores around town. Red Macy's credit cards are in the mail. Macy's merchandise is arriving on the floors. And the window displays on State Street are draped in Macy's red.
It's been almost a year since Federated Department Stores Inc. unveiled plans to drop Marshall Field's in favor of the Macy's moniker. On Sept. 9, a Saturday, the wait will be over, and the real test will begin: Will shoppers upset about losing the Marshall Field's name follow through on threats to boycott Macy's?
If conversions in other markets are any indication, wooing shoppers under the Macy's banner isn't going to be easy.
Scarborough Research found that in four out of five markets where Macy's already replaced the name of the hometown department store, shoppers surveyed say they are visiting Macy's less frequently than when the store operated under its original name.
Scarborough, a New York-based market research firm that measures consumer shopping patterns, tracked shoppers at Rich's in Atlanta, Goldsmiths in Memphis, Bon-Marche in Seattle, Lazarus in Columbus and Burdines in Miami as each store's name changed--first hyphenated to include the Macy's name in August 2003 and then converted to solely Macy's in March 2005.
When asked in annual surveys between 2002 and 2006 where they had shopped in the past three months, the number of consumers visiting Macy's fell in all of the markets surveyed except Miami, where Macy's was already a familiar name.
"There are certain brands that create a great deal of customer loyalty," said Jay McIntosh, director of consumer products for the Americas at New York-based Ernst & Young LLP's Chicago office. "Anyone who changes the names of one of those stores takes significant risks."
To be sure, consumers are renowned for saying one thing and doing another. And the appeal of department stores as shopping destinations has been waning for years, overshadowed by the ascent of specialty stores and big-box discount chains.
But the survey results signal that Federated could face an uphill road in Chicago where the Field's names is entrenched and shoppers have been vocal about their displeasure.
One critic is James McKay, creator of FieldsFansChicago.org, a blog that has received 600 posts in the past month from people upset with the name change. McKay is organizing a demonstration on Sept. 9, the day Macy's officially eclipses Field's.
More than 250 people have expressed support for the demonstration, he said, and his cohorts have already mailed about 6,000 "Keep It Marshall Field's" lapel stickers to Field's fans.
"The big protest has to do with the fact that we're losing part of Chicago," said McKay. "It is in support of Field's, but it's a much bigger thing. We're losing a piece of Chicago culture by it becoming Macy's. We're getting homogenized."
Ellen McGury Stone said she has already stopped shopping at Fields and destroyed her credit card. "I've lived in Chicago all of my life. My parents and my grandparents all shopped at Marshall Field's. It means Chicago to us. It's not just that they're changing the name. It's that they're changing it to the name of a store that means New York. It's a double whammy."
Chicago's feelings are certainly known to Federated's top brass. Karen Hoguet, the retailer's chief financial officer, addressed the issue last week in a conference call with analysts. "We're fairly optimistic that when the Chicago customer, which is the only one of the markets where we've had that backlash, we're hoping that when they see we're keeping the best of Field's but enhancing that greatly with all that Macy's offers, that the customer will be pleased."
Federated acquired Field's last year as part of its $11 billion purchase of May Department Stores Co. On Sept. 9, in one fell swoop, the Macy's name will appear on more than 400 regional department stores included in the deal, doubling the number of Macy's nameplates nationally and wiping out almost a dozen regional names, including Famous-Barr, Filene's, Hecht's and Kaufmann's.
Federated Chairman and CEO Terry Lundgren has repeatedly said Field's needs a makeover, pointing to years of declining sales. The New York-based firm is giving extra attention to Chicago, especially the high-profile Field's State Street flagship, creating a display candy kitchen for making Frango mints and building an express elevator to the famed 28 Shop, where well-heeled Chicagoans purchase designer clothing.
"One of the central issues is how to take advantage of a national scale and stay relevant to the local customer," Lundgren told a July luncheon gathering of North Michigan Avenue retailers. "We're trying to be locally responsible within a national umbrella."
Lundgren is betting he can reinvent the U.S. department store by creating one national brand, streamlining advertising and beefing up high-margin house brands such as INC and Alfani that shoppers can't find elsewhere.
Federated's latest results seem to support Lundgren's view. Same-store sales, a key measure of a retailer's health, rose 1.3 percent last year, and increased 2.2 percent in the first half of 2006, the company reported. Florida, former home of Burdines, and the Pacific Northwest, former home of Bon-Marche, were "two of the best performing divisions," noted spokesman Jim Sluzewski, who discounted Scarborough Research's findings.
With 61 stores ringing up annual sales estimated between $2 billion and $2.5 billion, Field's will account for less than 10 percent of Federated's $23 billion department store empire. Federated also owns 36 Bloomingdale's stores.
Standard & Poor's analyst Jason Asaeda said he considers changing the name a lesser risk than the threat of Macy's losing ground nationwide to J.C. Penney Co., Kohl's Corp. and Nordstrom Inc.
If the company stumbles in executing the transformation, the analyst said, that could lead to discounts and, in turn, hurt profit margins.
Penneys CEO Myron Ullman told investors last week that Penneys has already started to pick up sales from customers disenchanted with Macy's conversions.
Federated has at least won over Anthony Qaiyum, owner of Chicago-based Merz Apothecary. He operates a leased shop inside Field's State Street store and at first wasn't keen on losing Field's name.
Qaiyum believes the store was treated like an "unwanted stepchild" under previous owners Target Corp. and May Co.
"I do feel with Federated someone is finally paying attention and trying to make it a great department store. They're very serious about this in a way I haven't seen anyone before."