Interview: Terry Lund Grun --- Macy
The holiday shopping season
>> the head of federated department stores is optimistic about the holiday shopping season and federated is changing the names of 184 of its stores to macy's. suzy assaad spoke with terry lund grun about the outlook and name change.
>> we changed the name in atlanta to rich's, macy's 10 months ago and also in ohio and tennessee. and now we've had about a year in seattle and we've changed burdines in florida to burdines macy's. so we've had 18 months of the experience and have researched with the customer and the customered voted. we've had the best spring season that we've had in several years while we've had the name change going on. clearly there's a simplification in the name of macy's and we had this great asset we weren't using. why not.
>> it's certainly a brand that's well recognized across the country. we wanted to ask you here today, also, to give us insight as to what you're seeing in terms of the consumer, in terms of the upcoming trends over the next six months or so. we've been hearing a lot about how the consumer may pull back. we've been hearing terrible retail sales numbers across the sector in general, if not specifically you, but certainly it looks like there's a cyclical downtrend in retail sales ever since the second quarter. what are your comments on that?
>> first of all, we did have a very good spring season so in our case we broke out of the pack a little bit and felt good about our performance. third quarter is more sluggish. clearly, august was weaker than we expected and we know that there was a shift in the labor day period that threw us off a little bit and certainly back to school was not what we hoped it would be but i'm still optimistic about the fourth quarter. this month, of course, we have the hurricanes and we have a big business in florida but i try to look past those to get real trends in terms of the business and where it's going and there is a trend toward the dress-up business. we've been seeing that all season long and clearly see that in the fourth quarter and that's where our store benefits in men's clothing and women's career apparel. that's where we're strong and we're optimistic about the fourth quarter.% l
>> what do you hear from your customers in terms of confidence and their ability to continue to spend in the same patterns they have been?
>> so far our sense is that the trends have been working for us reasonably and if the west coast has been unaffected by hurricanes and unaffected by conventions and where we have stores in both boston and in new york. so there's been no interruptions. business continues to be strong and it's continued to be at the higher end and more unique parts of the business in this trade-up career-aimed apparel so that all those things we're looking at that we believe will benefit the rest of our stores across the country as things normalize. so our sense is that there isn't any reason for us to say that it will be substantially different than what we've already guided wall street for the fourth quarter, which is 1.5% to 3%.
>> speaking of wall street. there is an uncharitable analyst who says the recent hurricane activity in florida has given you the mother of all excuses to lower your sales numbers and basically give an impact to lowered retail sales numbers for your stores. any comment on that?
>> well, we're a big retailer in florida and we were closed for 70% of our stores were closed for three days so that impacts your business. and certainly even when ivan, which looks like it will miss most of our stores, there was such a scare that the state had a lot of evacuations. i don't want to use it as an excuse, but it is a fact that we do a lot of business in florida and when three hurricanes hit in six weeks, that impacts business.
>> is it one of your biggest states in terms of sales?
>> yes.
>> also, the other thing is, in terms of your inventory, unlike a lot of other retailers, it seems you've increased in the last year your inventories. are you worried about an economy that's slowing down? are you worried, is that a new trend of inventory management?
>> our inventories have been managed very well. we've reduced our inventory by 10% over the last two years and we still believe there's an opportunity to tighten further. and this is definitely a trend that we'll continue to focus on. we think we can spin and turn our inventories faster, get deliveries closer in hand and vendors to hold inventories longer for us so we've learned to address the inventory turn and it's benefited us and we'll take it into the future.
>> all right, well, also in the retail front today in a different area, kroger says its second-quarter profit was down 27% after it cut prices to compete with discounters. the shares had its biggest drop in six months after kroger said sales may not meet the annual forecasts, as well. net income coming in at 19 cents a share, sales up 5% to $13 billion. kroger's gross margin narrowed as it made cuts to close the price gap with wallmart and costco and sales in california also hurt at its ralph's chain as it failed to regain customers lost during a strike. retail sales data suggests that consumer spending may be emerging from a soft patch. that story up next.
