Macy’s adopts new strategies and celebrities to spur sales

Retail observers are
speculating that Macy’s could be bought out.

CINCINNATI (AP) — Macy’s Inc. is turning to star power this holiday season to fight disappointing sales and resistance to its takeover of local department stores.

Macy’s launched star-packed ads featuring celebrities such as Donald Trump and R&B singer Usher, made changes in merchandise including exclusive alliances with well-known designer brands and returned to more promotions at some locations.

The changes are meant to drive traffic and win over shoppers in some markets where the Macy’s name replaced local favorites it absorbed as part of its acquisition of the May Department Stores Co. in 2005.

“They’ve started in the right direction,” Wendy Liebmann, president of WSL Strategic Retail, said. “Now they have to deliver on the new message and the quality of their merchandise.”

Macy’s says its exclusive home furnishings collection by domestic entrepreneur Martha Stewart that debuted in September is off to a good start.

“There will be more Martha Stewart product in the stores for the holiday, and we’re optimistic about it,” Macy’s spokesman Jim Sluzewski said.

Macy’s recently announced a deal to be the exclusive department store retailer for the Tommy Hilfiger U.S.A. brand of men’s and women’s sportswear in the U.S. won’t begin until fall 2008, but the designer appears in current TV ads.

“The plan is to draw more customers with exclusive alliances and then sell them their private labels as well,” said Patricia Edwards, managing director and a retail analyst with Wentworth, Hauser and Violich.

Analysts say that while impending holiday sales aren’t a make-or-break situation, they need to show progress. That may be a tall order in view of a slumping housing market and consumer worries over jobs and tight credit. The National Retail Federation is predicting the slowest growth rate for holiday sales in five years.

Speculation about Macy’s as a takeover target began in June and has resurfaced a few times, with analysts not ruling it out.

“If Christmas is very disappointing and the stock price goes down, then they may become more vulnerable to takeover efforts,” Michael C. Appel, managing director of Quest Turnaround Advisors LLC., said.

The Cincinnati-based retailer attributed a 77 percent drop in its second-quarter earnings to continuing costs from the $11 billion acquisition of the May Co. in 2005 and lower sales. Macy’s said Thursday that same-store sales were down 1.5 percent in October — worse than the 0.6 estimate from analysts.

The retailer is slated to report third-quarter earnings Wednesday. Analysts surveyed by Thomson Financial are looking for earnings of 8 cents per share, after a loss due to the costs of the May acquisition on the same quarter of last year.