Macy's Business Outline Reveals Retailer's Vulnerabilities
Aug. 31, 1992
NEW YORK (AP) _ R.H. Macy & Co. on Monday released a sketchy outline of how it intends to address its financial and marketing problems over the next five years.
While short on specifics, the plan identified several problem areas facing the retailer, including staffing levels, customer frustration over unavailable products and the effectiveness of its advertising and promotions.
Macy proposed cutting back management staff and limiting the number of sales it holds as well as to continually re-evaluate unprofitable businesses.
Executives for Macy, which has been operating under Chapter 11 bankruptcy protection since January, presented the outline to several creditor groups in private meetings last week, and the initial response seemed favorable.
''We regard their business plan outline as a very impressive and well- thought-out manifesto for the company's future,'' said Robert Miller, an attorney with Berlack Israels & Liberman, who represents Macy's bondholders' committee.
''We're heartened by the fact that the company has been able to identify its problems and come up with a plan of action,'' he said.
A far more detailed business plan will be submitted to creditors in November and will serve as a ''road map'' for the retailer's recapitalizaton and emergence from Chapter 11.
Miller acknowledged that creditors originally believed Macy would emerge from bankruptcy protection ''very quickly.'' It was believed that the retailer's primary problem was coping with the vast amount of debt accumulated in a 1986 leveraged buyout and the purchase of two department store chains in 1988.
But Miller said it has become apparent that Macy's problems go much deeper. ''The company has underperformed its competititors for several years and is currently underperforming them,'' he said. The retailer is unlikely to emerge from Chapter 11 until late 1993 or early 1994, Miller said. That would not be an exceptionally long reorganization for a retailer.
To address some of its problems, Macy hired the market research firm Kurt Salmon-Kennedy Associates, which has interviewed nearly 7,000 shoppers at 20 Macy's locations nationwide. It was the most extensive market research Macy has undertaken in many years.
Research showed that while most customers are loyal to the retailer, they occasionally are disappointed because items are unavailable.
A new computerized inventory system is now in place and should help remedy product shortages, they said in a prepared statement. Macy co-chairmen Mark Handler and Myron Ullman said in a telephone interview that it is realistic to anticipate an 8 percent sales increase - the equivalent of $500 million - with improved availability of goods.
''We want to focus our attention on what customers told us they would expect to find in a Macy's or a Bullock's, and that is full assortment at fair, competitive pricing and convenience,'' Ullman said.
Last year's disastrous Christmas shopping season left Macy's short of cash to pay its suppliers, pushing it into bankruptcy proceedings by late January. Handler and Ullman said they expect a modest 1.9 percent sales increase this holiday season over last year.
The two have been running the company since late April.
Since its bankruptcy filing, Macy has closed eight department stores and 62 specialty stores. But it also has opened new stores, including the recent debut of its branch at the new Mall of America in Minneapolis.
With the opening of a new Bullock's store in Burbank, Calif., scheduled for this Wednesday, Macy will operate 114 Macy's and Bullock's department stores, 19 I. Magnin specialty stores, 69 Aeropostale and Charter Club specialty stores and 10 Macy's Closeout clearance stores.