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Burdines-Macy's: Will it still be the Florida store?

Federated Department Stores officials don't deny that Friday's transition to Burdines-Macy's will be followed someday by a decision to put only the Macy's name on the stores and the merchandise.

Published January 25, 2004

Shoppers who have longed for Macy's, that icon of Manhattan retailing, to open a store in the Tampa Bay area are finally getting their wish. But they probably didn't see it happening this way.

Burdines changes its name to Burdines-Macy's on Friday.

"It gives us the best of both worlds," said Tim Adams, president of Burdines, the Miami unit of Federated Department Stores Inc. that is being merged with Macy's Florida stores. "Few people in Florida don't know Burdines. Nationally, few people don't know Macy's."

New Burdines-Macy's credit cards are in the mail. Interior store signs are being changed, although the big, costly signs outside will stay the same. A new hyphenated logo will give Burdines ads a different look.

The combination of Burdines and the Macy's stores that already were in the state, all but one of them in South Florida, will create a 63-store operation. It will inherit Burdines' slogan - "the Florida store" - and it will remain one of the few major department stores designed to serve only one state, its merchandise mix custom-tailored for Florida by a buying staff in Miami.

Burdines-Macy's is expected to have more than $1.5-billion in annual sales. On its own, Burdines has weathered stagnant sales, slipping from $1.48-billion in 2000 to about $1.36-billion in both 2001 and 2002. The numbers for the 2003 fiscal year have yet to be reported.

The merger is another step in the department store industry's long-running saga of consolidation.

Burdines-Macy's may not roll off a customer's tongue easily. Some analysts think the name will confuse customers. But parent Federated, which owns 466 stores operating under seven names, thinks keeping the regional identity will differentiate the chain from its competitors vying to outfit the fashion-conscious of the middle class.

Burdines-Macy's will offer a beefed-up stable of private store labels associated with Macy's and some new designer-name exclusives, moves intended to address the complaint of shoppers that all department stores are stocked with the same brands.

Burdines is the last of Federated's five regional department store chains to switch to a hyphenated Macy's nameplate. The other four were Rich's, Goldsmith's, Bon Marche and Lazarus.

Federated decided it was time to make the switch in Florida after wrestling with its situation in Atlanta. There, Rich's, a local chain with a lineage dating back to 1867, shared the market with Macy's. In the end, seven older stores were closed, Rich's became Rich's-Macy's and Atlanta got its first two Bloomingdale's, another Federated brand. But that decision was riven with internal turf battles.

"Honestly, one of the biggest obstacles in doing this was our own emotional history," said Susan Kronick, vice chairman of Federated, who is directing the integration of the regional nameplates. "We learned that the customer values the regional name, but what they really value is the quality of what's offered in a store. Once we found out the customer was pretty favorable to the new name, we decided we can deal with our own emotional baggage."

* * *

The Burdines family founded its namesake department store in 1898 in Miami's pioneer days, and later developed "the Florida Store" niche around "Sunshine Fashion." In home decor, that means a more tropical look. In apparel, it means lighter fabric and a color palette heavy on pastels and warm weather colors.

"When the new winter coats and sweaters come out in August, Burdines has a buying staff in Miami that knows not to stock them until it actually gets cold," said Marshall Cohen, who tracks the apparel industry for NPD Group.

The chain will keep the 500 employees in Miami, from buyers to marketers, who select Burdines' offerings for Florida customers. Otherwise the jobs would have been shifted to Macy's East headquarters in New York.

In South Florida, where Burdines and Macy's have operated as separate chains for years, the changes are quite visible as Federated reduces what would have been duplicate stores in the combined operation. A Macy's in Boynton Beach is closing. Two other Macy's in Palm Beach Gardens and Miami's Aventura Mall will close for months, then re-emerge as three-story Burdines-Macy's Home stores designed to complement the chain's conventional, apparel-laden stores at the same malls.

The owners of Palm Beach Gardens Mall sued to stop the change there, claiming the lease requires Federated to fill the space with a full-line department store, not a glorified furniture store. "We are confident this is going to be worked out with the mall owner," said Burdines president Adams.

In the Tampa Bay area, the changes at Burdines are subtle but have been building for years. Burdines has been stocking more and more Macy's brands ever since Federated bought R.H. Macy's in 1994. The most recent change is a switch of the fine jewelry selection from a leased department to the Macy's lineup this month.

There is more to come. All bay area stores will get amenities, including more comfortable fitting rooms, living-room-style seating areas with TV sets, shopping carts, computer kiosks for price checks and bigger directional signs designed to make shopping faster and easier. Most of the amenities have been installed in tests at Tyrone Square Mall in St. Petersburg and WestShore Plaza in Tampa.

To afford the remodeling bills over the next few years, Burdines-Macy's has no new stores in the pipeline.

The process reflects how all department stores are trying to re-invent themselves and end a decades-long backslide. They're trying to win customers lost to specialty chains such as Gap Inc. and Limited Inc. and discount stores such as TJMaxx and Target.

But the tightest squeeze is in the middle market: Beall's, Sears and JCPenney are fighting to win the moderate-price customer. Dillard's and the Federated stores are trying to hold on to the customer looking for something between JCPenney and Neiman Marcus.

"Department stores are struggling to become more relevant to the customer," said Bart Weitz, who heads the retailing research and education program at the University of Florida.

But he said the Burdines-Macy's marriage is "largely about cost-cutting to save advertising and marketing money required to support two chains in the same market. The question is: When will they finally cut the cord on Burdines? Then, how do they avoid ending up with a homogenized merchandise mix the rest of the country gets?"

Federated officials don't deny that this month's transition from Burdines to Burdines-Macy's will be followed someday by a decision to put only the Macy's name on the stores and the merchandise.

Eventually, Federated will operate only two department store nameplates: Macy's, in the "moderate to better" price range, and Bloomingdale's, for the high-end.

"This is a national brand strategy," said Carol Sanger, Federated spokeswoman.

The next step along the way: a new advertising strategy. Because the Macy's brand has a national presence, it can be advertised on national TV for less than what an aggregation of local stations would charge. So Federated, which spends more than $1-billion a year on advertising, has three tests in other states to shift more of its ad spending from print media to TV and radio. Dillard's Inc. recently embarked on a similar strategy.

* * *

A few years ago, experts criticized department stores for looking alike. Too many had become a sea of Ralph Lauren and Tommy Hilfiger.

Federated dramatically cut back floor space dedicated to the two designers. The company lifted its goal for store brands to 20 percent of sales, up from the current 16 percent. Nationally, store brands are about 36 percent of apparel sales, thanks mostly to specialty retailers.

Federated cranks out 30 store brands, from Greendog for kids to Alfani for tailored clothing.

"Some of the brands such as Charter Club (for traditional styles) and INC (women's contemporary) are so strong that many customers see them as designer brands that stand on their own," said Walter Loeb, a New York retail consultant. INC, in fact, is distinct enough to be sold as a designer label by other retailers in Australia and parts of South America.

To create variety, INC increased store deliveries from monthly to weekly so regulars see something new each trip. Federated plans to do the same thing with its other most popular store brands.

But the store brand strategy has its risks.

Makers of designer brands pay for advertising and sometimes will take back goods that don't sell. Store brands may produce a bigger profit despite pricetags about 20 percent less than name brands. But "whatever you don't sell, you own," said Erik Gordon, a marketing professor at Johns Hopkins University, and "if you're successful, Target will knock you off at $7 cheaper."

Unlike most retailers, Federated advertises its private labels to create a market for them. And Federated is making bold moves to attract younger shoppers to its stores.

Consider the guerrilla marketing Federated used to launch American Rag Cie, its new brand of acid-washed, low-rise denim and sportswear aimed at 18- to 25-year-olds. Its flea-market-style clothing was inspired by a hip Los Angeles boutique of the same name that sells "fiercely independent clothes."

Federated marketers made American Rag a co-sponsor of the Lollapalooza concert tour that featured groups such as Jane's Addiction, Blender and Queens of the Stone Age. It set up a Web site for free music downloads. It steered clear of professional models for fashion shots, using a young woman with orthodontic braces in ads in Elle Girl, Blender and Jane.

In stores, the goods are displayed in a retro boutique with 1950s TV sets, old plastic Emerson radios and dated, brightly colored American Tourister luggage.

But Federated may have overplayed its hand at focus group buzz words. The label describes American Rag as "genuine, authentic, original, vintage. Est: 1984."

American Rag is on track to become a $50-million annual business. But so far the line is available in only 120 stores while Federated does more fine-tuning.

Burdines-Macy's carries more so-called urban, hip-hop brands than any other department store in Florida. But the company has no intention of knocking off Sean John, Ecko, Phat Farm or Roca Wear.

"Frankly, the street look changes too fast for us to keep up," said Joe Fezcko, executive vice president of Federated Merchandising.

Federated also plans to launch INC men's apparel, expand its Cellar line of kitchenware and broaden a new line of candles and garden accessories called Inhabit.

At the same time, the chain is bringing in new designer lines: Kate Spade and Vera Wang decorator lines this spring; Michael Kors better sportswear for men and women this fall; and Tommy Hilfiger's new "H Collection" casual career wear of $75 shirts and $200 sport jackets.

"It's not about age or income," said Federated vice chairman Kronick, whose father once headed Abraham & Strauss, a defunct Federated department store chain in New York. "Many women in their 50s and 60s wear edgy fashion, and we've seen super-traditional women who are 26. We're aiming to satisfy her needs by pitching goods above the dead center middle of the market."

Federated research confirmed its best prospects to improve sales are customers already shopping in the Burdines-Macy's stores.

"We identified a fashion-conscious core customer who shops 78 times a year for items we sell at Burdines-Macy's," Kronick said. "Contrary to popular belief, she's still shopping and frequently in our store. We just have to get her to buy something more often."

That finding is supported in the Tampa Bay area. Despite the arrival of Saks Fifth Avenue, Nordstrom, Lord & Taylor and Neiman Marcus in recent years, Burdines' customer traffic held relatively steady in 2003 compared with the fall of 1998 before the influx began. According to the Scarborough Report, 21 percent of Tampa Bay shoppers were in a Burdines in the past month, down only slightly from 24 percent in 1998. Burdines has one fewer store in the market than it did in 1998.

Burdines shoppers say the coming name change won't undermine their loyalty.

"I'm in Burdines weekly but I only buy when it's at least 30 percent off," said Lisa Dudley, a bartender at a Madeira Beach hotel. "They have the most awesome sales."

Added Claudia Emery, a condo sales director who lives in Tierra Verde:

"I shop them all from Neiman's on down. But I end up at Burdines more often because they offer the best combination of price and quality."

- Mark Albright can be reached at or 727 893-8252.

Federated Department Stores. Inc.

Founded in 1830 in Cincinnati, Federated grew into the predominant consolidator of family-owned fashion department store chains in the late 20th century. Federated owns the fabled Bloomingdale's store in Manhattan and Macy's Herald Square location, which still claims to be the nation's largest store. Macy's is also known for the film "Miracle on 34th Street" and the Thanksgiving Day Parade it sponsors. With revenues of $15.4-billion in 2002, Federated is the nation's 18th-largest retailer.

Here are its seven department store brands:

Bloomingdale's: 34 stores in 12 states, including five in Florida.

Macy's: 248 stores in 21 states, Puerto Rico and Guam.

Bon-Macy's: 50 stores in five states in the Northwest.

Burdines-Macy's: 63 stores in Florida.

Goldsmith's-Macy's: Five stores in Tennessee.

Lazarus-Macy's: 38 stores in four Midwest states and Pennsylvania.

Rich's-Macy's: 28 stores in Georgia, South Carolina and Alabama.

- Source: Federated Department Stores Inc.

[Last modified January 25, 2004, 01:45:38]

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