FASHION MARKETING STRATEGY

MACY’S AND JC PENNY

SUBMITTED BY :-

ZAINAB LIMBDIWALA

MAYUKI BHASAK

NIHARIKA GROVER

POONAM KUMARI

ANSHIKA RAJWANSHI

Table of content :

MACY’S

1. INTRODUCTION TO MACY’S

2. HISTORY OF MACY’S

3. SITUATION ANAYLISIS AND INDUSTRY OVERVIEW FOR MACY’S

4. COMMERCIAL VISION AND PHILOSOPHY

5. MARKETING AND ADVERTISING

6. MARKETING STRATEGY

7. CUSTOMER PROFILE

8. ANALYSIS

COMPETITORS OVERVIEW

J C PENNY

1. INTRODUCTION TO JC PENNY

2. HISTORY OF JC PENNY

3. COMMERCIAL VISION

4. MARKETING

5. MARKETING STRATEG AND MEDIA PLAN

6. CUSTOMER PROFILE

7. ANALYSIS

SURVIVAL STRATEGIES FOR MACY’S AND JC PENNY

PERCEPTUAL MAPPING

MACY’S

INTRODUCTION & HISTORY

Macy's is a chain of mid-to-high range department stores headquartered in

Cincinnati, Ohio and New York, New York. Its selection of clothing merchandise can

vary significantly from location to location, resulting in the exclusive availability of

certain brands in only higher end stores. The company has designated additional

regional flagships but in major urban centers and operates a total of 800 U.S. stores

(as of January 30, 2010).

Macy's was founded in 1858 by Rowland Hussey Macy. On the company's first day

of business on October 28, 1858 sales totaled $11.06 (Approximately $287 in 2007

USD). Macy had established a dry goods store in downtown Haverhill,

Massachusetts in 1851 that initially served the mill industry employees of the area.

Macy moved to New York City and established a new store named "R. H. Macy &

Company" on the corner of 14th Street and 6th Avenue, later expanding to 18th

Street and Broadway, on the "Ladies' Mile", the 19th century elite shopping district,

where it remained for nearly forty years.

HISTORY

Macy’s has a long and rich history dating back to 1858 and its first store on 14 th

Street and 6th Avenue in New York City. After several unsuccessful retail ventures,

Rowland Hussey Macy launched what is now one of one of the most recognizable

department store brands. Macy’s grew from its meager beginnings into America’s

department store. In fact, the Macy’sbrand is ingrained into Americana. Since 1924

Macy’s name has been attached to the time honored tradition of the annual Macy’s

Thanksgiving Day Parade. Macy’s also played prominently in the movie "Miracle on

34th Street".

In 1994, Macy’s merged with Federated Department Stores creating the world’s

largest department store company. After the merger, Federated beagn operating

more than 850 department stores in 45 states under the names of Macy's,

Bloomingdale's, Famous-Barr, Filene's, Foley's, Hecht's, Kaufmann's, L.S. Ayres,

Marshall Field's, Meier & Frank, Robinsons-May, Strawbridge's and The Jones

Store.

SITUATION ANALYSIS

Over the last decade, Federated Department Stores has expanded the Macy’s brand

into select markets. Federated’s acquisitions and experiment of co-branding Macy’s

with regional nameplates has lead to the current effort – the complete conversion of

Federated department stores, with the exception of Bloomingdale’s, into the Macy’s

brand. This effort will be complete when approximately 400 May Department Stores

are converted to the Macy’s name in September of this year.

OVERVIEW OF INDUSTRY TRENDS

Department stores are in a period of decline and consolidation. Their relevancy has

waned as competition has increased. Department stores find themselves being - 2 -

forced to compete with discounters, luxury chains, specialty stores and Internet

outlets. They’re being squeezed from all side. A half a century ago, most department

stores were freestanding retail establishments offering one-stop shopping for

consumers. Over a short period of time, these flagship downtown department stores

would gradually give way to a new environment of retailing – the suburban shopping

mall. Today department stores “anchor” some 1200 suburban shopping malls and sit

side by side with a host of competitors.

Today’s department stores are an endangered species. In 1980 there were 35 major

department store chains. Today there are only 13 left. 1 In 1990, conventional

department stores accounted for 2.5% of total household income in America. A

decade later, their share had tumbled to 1.6%. 2 As a result of this contraction,

department stores have been forced to reinvent themselves or risk the prospects of

going out of business. Two distinct models of success for the beleaguered

department store industry have emerged.

The first is the “strong retail brand” approach. In this approach, department stores

have found success creating and promoting their in-house merchandise brands.

Assuming in-house brands reach a certain level of popularity, the department store

can promote itself and its brands as opposed to any individual third party brand

within. This approach has higher operating costs but can also produce higher

margins. The success of the Marks & Spencer label is an example of the strong retail

brand approach.

The second model for success is the “showcase” approach. In this approach, the

department store not only sells other brands, they leverage vendors of those brands

to take responsibility for an increasing part of the retail process. Department stores

have vendors active in stocking, staffing and other essential retail functions.

Showcase department stores often sell floor space. The key for showcase

department stores then becomes promoting the attraction of the shopping

experience. This approach may lead to lower margins but the tradeoff is lower

operating costs. A good example of the showcase model is Selfridges, which

positions itself as a retail theme-park.

CORPORATE VISION, PHILOSOPHY AND FINANCIAL OBJECTIVES

Corporate Vision

Macy’s, Inc. is a premier national retailer with iconic brands that each operate a

multichannel business involving outstanding stores and dynamic online sites. While

Macy’s and Bloomingdale’s are known worldwide, each has its own unique identity,

brand strategy, customer focus and business strategy.

Corporate Philosophy

Macy’s, Inc. clearly recognizes that the customer is paramount and that all actions

and strategies must be directed toward providing a localized merchandise offering

and shopping experience to targeted consumers through dynamic department stores

and online sites.

Aggressive implementation of the company’s customer-centric strategies, as well as

careful and thorough planning, will provide Macy’s, Inc.’s department stores with an

important competitive edge.

Macy’s, Inc. is committed to open and honest communications with employees,

shareholders, vendors, customers, financial analysts and the news media. The

company seeks to be proactive in sharing information and in keeping these key

stakeholder groups up-to-date on important and material developments.

At Macy’s, Inc., the greatest strength lies in the skill, judgment and talent of the

people. Every day a production of enormous magnitude takes place on the selling

floors and behind the scenes, where the company people bring the company’s

strategic goals to life. Their priority of attracting, retaining and growing the most

talented people in the retail industry has been and will continue to be their greatest

advantage.

Corporate Financial Objectives

The objectives of Macy’s, Inc. are:

To grow sales;

To continue to increase the company’s profitability levels (earnings before

interest, taxes, depreciation and amortization) as a percent of sales;

To improve Return on Invested Capital;

To maximize total shareholder return.

MARKETING/ADVERTISING

Multicultural marketing is a key element of Macy’s, Inc.’s business and diversity

strategies. Ongoing multicultural advertising campaigns are a way for the company

to tailor our brand messages and product offerings to our diverse customer

segments through targeted media. By communicating with our customers in the

manner they prefer and appreciate, Macy’s, Inc. is creating deep and lasting

relationships with our customers.

Macy's becomes a national brand

On February 21, 2006, Macy's appointed a new chief marketing officer, Anne

MacDonald, to oversee the transformation of Macy's into a "national department

store." By September 9, 2006, and after renaming the former May Company

locations, Macy's operated approximately 850 stores in the United States. To

promote its largest and most recent expansion, Macy's used a version of the Martha

and the Vandellas hit song, "Dancing in the Street", in its advertising. Also, the

company took props from its annual Thanksgiving Day parade to various re-labeled

stores throughout the nation, in what the company marketed as its "Parade on

Parade."

Macy's significantly increased its use of television advertising and product placement

in 2006 and 2007, using branding spots that featured the new Macy's star logo.

During the February 11, 2007, episode of the popular ABC television series

Desperate Housewives, a Macy's (under the fictional name McMay's) location in the

fictional city of Fairview was featured, a rare instance of product placement

promoting a department store chain in a scripted series. Nearly two years earlier,

one of the first national commercials for Macy's had aired during Desperate

Housewives, shortly after the conversion of Rich's, Lazarus, Goldsmith's, The Bon

Marché and Burdines.

The Macy's at Greenspoint Mall in Greenspoint, Houston, Texas was a Foley's until

2006.On February 27, 2007, Federated Department Stores announced plans to

change its corporate name from Federated Department Stores, Inc., to Macy's

Group, Inc. By March 28, the company further announced plans to convert its stock

ticker symbol from "FD" to "M", and revised its earlier proposed name change,

instead opting to change to Macy's, Inc. The change in corporate names was

approved by shareholders on May 18, 2007, and took effect on June 1, 2007. The

company will continue to operate stores under both the Macy's and Bloomingdale's

nameplates.

THE MACY’S BRAND. The Macy’s brand is one of its strongest assets. According to

Federated CEO Terry Lundgren “The Macy’s brand is one of the most recognizable

names in the retail department store industry”. From the movie "Miracle on 34 th

Street" to the Macy’s Thanksgiving Day Parade (the second most watched event

after the Super Bowl3), Macy’s has integrated itself into the cultural fabric of

America.

ECONOMIES OF SCALE. By converting many regional chains into the singular

Macy’s brand, Federated is expecting to realize greater economies of scale.

Redundancies will be eliminated and everyday business functions can be

streamlined.

PURCHASING POWER. One of Macy’s newfound strengths will be its size. In terms

of purchasing power, Macy’s may rival Wal-Mart in its ability to use sheer volume to

secure the best prices. Additionally, Macy’s will have greater leverage in making sure

that it secures the hottest merchandise.

MARKETING EFFICIENCIES. Macy’s, as a single entity, will allow Federated to

better focus on its core assets and implement marketing efficiencies through national

marketing campaigns. As opposed to splitting resources for regional campaigns,

Macy’s will be able to buy more national advertising.

MIX NEW WITH OLD CHANNELS. To compete with pure play internet retailers,

Macy’s is in the stronger position of being able to leverage the storefront and the

internet. Nationwide storefronts allow Macy’s to cross promote the internet with its

physical presence. Customers can research online at Macys.com and then come

into a store and buy. Customers can also buy items at Macys.com with the security

of knowing a return can be handled at the local store. This unique position allows

Macy’s a competitive advantage over internet only retailers.

TRANSITION PERIOD. In making a change from regional brands to the Macy’s

brand, there will be an inevitable transition period that presents both opportunities

and challenges. How Macy’s handles this initial transition period will be of the utmost

importance to the overall success or failure of this nationwide rollout. Macy’s must

learn from each rollout and continually improve. For instance, Macy’s should be keen

to evaluate the experience in Columbus, Ohio.

According to Scarborough Research, the number of customers walking into Macy’s

stores in the

Columbus area fell 4.5 percent after the name change from the regional Lazarus

brand. Customers are initially resistant to change and the transition period will

indeed serve to influence many customers’ first impression. If customers have a

negative initial experience, Macy’s will have difficulty erasing that perception.

LOSS OF REGIONAL’S BRAND VALUE. Customers have a relationship with their

regional department store. These regional have often spent many years and vast

resources cultivating their brand image and affixing it in their customers’ psyche. By

moving to a single national brand, Macy’s negates the regional’s’ established brand

value.

IMPERSONALITY OF A NATIONAL BRAND. Macy’s has to overcome the

perception that one size doesn’t fit all. Macy’s must realize that Manhattan isn’t small

town America. One of the benefits of the regional stores was the ability to serve

different markets with regionally appropriate products and experience. Macy’s must

do likewise and appeal to several distinct regional markets.

REPOSITIONING. Macy’s new strategy will be “affordable luxury” which will feature

new private labeled brands and brand-names such as Ralph Lauren, Jones New

York, Calvin Klein and Liz Claiborne. This “affordable luxury” strategy puts Macy’s

somewhere in the middle of the department store food chain. Retailers like Neiman

Marcus and Nordstrom have found success catering to affluent customers. And

discounters like Wal-Market have cornered the bargain hunters. Macy’s challenge is

to find a viable middle ground.

EVOLVING CUSTOMERS. The vast majority of customers have changed their

shopping habits. Today’s customers are more inclined to research a purchase

online, comparison shop and then visit a store. Today’s customers are well informed.

Macy’s must appeal to this 21st century shopper and meet their needs throughout

the entire customer lifecycle.

FIRST IMPRESSIONS. You only get one shot. Macy’s greatest opportunity in these

new markets will come in the form of a first impression. This first impression will have

significant impact on those loyal to their departed regional department store. These

new shoppers will come and judge the overall shopping experience and the

merchandise behind the Macy’s name. INFLUENCE. Stale merchandise has been a

significant problem for department stores. By in large, department stores haven’t

excited shoppers in some time. As a national store, Macy’s will have more influence

with suppliers.

If properly utilized, this newfound influence can bring in the latest must have

products and exclusive merchandise.

STEP OUT FROM THE PACK. In consolidating several regional’s into a single

national brand, Federated should be able to better distinguish the Macy’s brand.

Fewer names in the market will mean the Macy’s brand has a better opportunity to

stand out amongst a smaller crowd.

STRENGHTEN THE FINANCIAL HEALTH. The new acquisitions and transition to

Macy’s presents an opportunity to strengthen the financial health of Federated.

Macy’s size should allow it realize economies of scale. Operating costs have the

opportunity to decrease. And margins have the opportunity to and should increase.

THE SQUEEZE. Macy’s faces the continued threat of being squeezed from above,

below, by specialty shops, internet retailers and middle ground competitors like

Kohl’s. Should these competitive forces continue to erode Macy’s target markets,

Macy’s national strategy could be seriously jeopardized.

ECONOMY. Gas prices, higher interest rates, a stagnant stock market and fears of

terrorism could further contribute to the pain in the pocketbook of every day 5

consumers. Macy’s, as do all retailers, faces a real threat of an economic slowdown.

CUSTOMER PROFILE

Macy's to develop customer segmentation models

Macy's Inc. has signed an agreement with consumer insight firm DunnhumbyUSA to

analyze Macy's customer sales data, develop customer segmentation models and

work with Macy's to apply the learnings to accelerate future sales growth.

Under the multiyear agreement, Macy's will be DunnhumbyUSA's exclusive client in

the department store category.

The deal will support the My Macy's strategy, a locally driven merchandising initiative

meant to put the products customers want in the local Macy's stores they shop. The

My Macy's program was announced in February.

“Macy's now has this new organizational mode in 20 districts to improve the

assortment,” said Jim Sluzewski, a spokesman for Macy's. The deal with

DunnhumbyUSA “is an additional piece to that initiative of analyzing specific

customer data and reaching every customer in a way that is meaningful to her,” he

added.

The goal is to leverage knowledge of customer segments to drive same-store sales,

profitability, customer loyalty and, ultimately, shareholder value.

"For Macy's to continue to build a sustainable competitive advantage, we need to

fully understand our customers and mold our offering to satisfy each customer's

specific needs," said Terry J. Lundgren, president and CEO of Macy's, in a

statement.

In a separate announcement, Macy's reported same-store sales for the second

quarter ended August 2 declined 2.1%. Sales in the second quarter totaled $5.718

billion, a decrease of 3% compared with the same period last year.

Parties were hosted, sponsored major sporting events, toured the famous Macy’s

Thanksgiving Day Parade, triggered spontaneous dancing in the streets … and

made millions of customers very, very happy as we introduced Macy’s in a way they

had never before seen.” However, Macy’s same-store sales, while at first increasing

steadily, have decreased seven of the last eleven months in 2007. April through July

saw decreases in sales comparing the national Macy’s brand to the variety of brands

present in 2006. In September and October 2007, same-stores sales continued to

decline more than a year after unifying under the single Macy’s brand. The best

explanation for this decreases in same-store sales is that while Macy’s has focused

heavily on national branding and awareness, their efforts to get customers to

purchase goods in their local Macy’s have fallen short. (Klein Partners, 2007) Instead

of resorting to nationwide marketing campaigns and drastically cutting prices to

generate volume sales, Macy’s should focus more of its marketing efforts on focused

advertising at a local or targeted level. First, Macy’s introduced loyalty program

fortheir credit card holders to reward them for shopping and to send them special

coupons for merchandise they purchase. While this is a start, Macy’s should share

this customer information with their local store managers who can more effectively

reach their local customers. A flaw in Macy’s national marketing strategy is that it

cannot respond to localized market forces that a store manager may encounter. On

any given day, a local store manager may face competition from specialty stores or

other national retailers that are trying to increase sales with savings or coupons.

Store managers do not presently have any ability to reach their local communities to

counter changing inventory or prices. Like Wal-Mart, almost every Macy’s

advertisement warns the consumer in fine print that selection may vary at their

particular location.

Overall, the national branding of Macy’s appears to be a mixed result. On the one

hand, a national brand strategy allows Macy’s to compete on the national stage with

retailers like JC Penney, on the other hand, however, without allowing local

managers access to the power of the Macy’s brand, local managers cannot respond

to local conditions like inventory or the prices of competitors. Moreover, local

managers do not have the ability to target their best clients with tailored messages or

special offers only for their loyalty.

MARKETING STRATEGY

Macy’s, have implemented strong marketing plans to continue to grow and create a

unique and positive store experience for their customers in order to better satisfy

their needs and wants. By doing so, they have enhanced their ability to build their

brand equity and positive share of mind and heart. By properly employing these

strategies, each company can gain profits and sustainability for years to come.

Macy’s Inc., the nation’s largest department store chain, has found success in a

down economy—by shaping its products and marketing efforts to the local

consumer. “Given the difficult economic climate, we had an excellent quarter. Our

business improved progressively each month during the period and we are entering

the holiday selling season confident in our locally focused organizational structure,”

said Macy’s President Terry Lundgren in a recent statement. Although in-store sales

were down 4 percent compared to the same period in 2008, its online sales jumped

by 21 percent during the third quarter and 16 percent for the year. The economy has

not quite recovered, but Macy’s took the plunge and opened four additional stores in

Fresno, Calif.; Visalia, Calif.; Dallas- Fort Worth, Texas; and Kansas City, Mo.

Additionally, it reopened two stores near Houston that were closed due to Hurricane

Ike.

Financially, Macy’s did better than expected during the third quarter, with $489

million cash in its coffers, 63 percent higher than during the same period in 2008.

Macy’s operates 850 department stores in 45 states, including Guam and Puerto

Rico, a staggering increase in the number of stores from 424 in 2005.

Lundgren knows the economic problems in today’s market environment. Consumers

are more selective and are seeking bargains. To get customers through the door,

knowledge of consumer tastes, trends, and price consciousness has become the

mainstay of the retail sector. Macy’s has fine-tuned its customer orientation to the

point that it sent close to 700 different versions of its fall catalog to customers over

the past months. In the past, Macy’s sent one catalog for each season. The

department store hired market research firm dunnhumbyUSA LLC to track and

analyze sales data and develop a customer segmentation model. Despite releasing

lower second-quarter sales results and cutting its profit forecast for the rest of the

year, Macy's says the good news is that it's doing better than its competition. It also

says it will launch a new marketing approach and announced a new partnership, with

Dunnhumby.

While the British retailing consultancy may not be a familiar name to American

marketers, many observers credit Dunnhumby as a key factor in Tesco's success in

the UK. Macy's describes the deal as "a significant multi-year agreement," adding

that Macy's will be DunnhumbyUSA's exclusive department store client.

(DunnhumbyUSA is a joint venture between the British company and Kroger.)

DunnhumbyUSA will "analyze Macy's customer sales data, develop customer

segmentation models, and work with the Macy's organization" to increase sales,

Macy's says in its release. Meanwhile, Macy's released lower second-quarter results.

The company, which no longer reports monthly sales reports, says same-store sales

fell 2.1% in the quarter. Overall, sales slipped 3% to $5.72 billion.

"While we are never fully satisfied when sales are down," the company says in its

release, "we continued to outperform most of our major competitors in same-store

sales and to gain market share with a combination of differentiated merchandise,

current fashions and great value."

The company says it is launching an exclusive Tommy Hilfiger product which, will be

adding 275 FAO Schwarz toy shops in its stores, and is planning plenty of hoopla for

the brand's sesquicentennial in the third quarter. "The fourth quarter will follow with a

fresh approach to holiday marketing that we believe will be compelling to our

customers," it says.

Still, the company is lowering its outlook for the year. "The performance of the

economy and level of consumer confidence will have an important bearing on retail

sales in the second half of 2008, and thus it is difficult to forecast future results with

any level of certainty," it says, but is now predicting that same-store sales in the fall

season will be flat to down 1%, resulting in a decline of between 1% and 1.6% for the

full year.

The parade is just one of the many exclusive, grandiose events that have been a

significant part of the brand's marketing strategy over the years, extending its

presence in the community and thereby its special place in the cultural landscape.

The strategy follows the brand's logical philosophy: those more vibrant communities

provide better environments for its stores to do business, and for its employees and

customers to live and work. The event roster includes the Fourth of July Fireworks

Spectacular, fashion shows, cooking shows, numerous charitable events, and

elaborates in-store flower shows, where some 500,000 plants and flowers turn the

ground floor of the New York, San Francisco, Chicago and Minneapolis stores into

living gardens attracting more than 250,000 people to each location. And of course,

Macy's Christmas window displays are an event unto themselves. At the end of the

first Thanksgiving Day parade, Santa disembarked from his sleigh, climbed above

the Macy's marquee, unveiled the windows and declared that the holiday season had

begun. "The holiday windows are a highlight of the Christmas season, but day in and

day out, the windows are tied to our marketing strategy," says Patti Lee, senior VP

and general manager of Macy's Herald Square. "There's a bit of magic in retail and I

don't think Macy's has ever forgotten that," says Bob Brown, director of advertising

for the Las Vegas Review Journal and Sun. "When I was a kid, one of my first

impressions of Macy's was that it was where you went for Christmas shopping. And

even over the years as they have become one of my best clients and

I've...developed a close relationship with them, I always have in the back of my mind

that Macy's is where the magic began for me as a kid."

Under the multiyear agreement, Macy's will be DunnhumbyUSA's exclusive client in

the department store category.

The deal will support the My Macy's strategy, a locally driven merchandising initiative

meant to put the products customers want in the local Macy's stores they shop. The

My Macy's program was announced in February.2008

“Macy's now has this new organizational mode in 20 districts to improve the

assortment,” said Jim Sluzewski, a spokesman for Macy's. The deal with

DunnhumbyUSA “is an additional piece to that initiative of analyzing specific

customer data and reaching every customer in a way that is meaningful to her,” he

added.

The goal is to leverage knowledge of customer segments to drive same-store sales,

profitability, customer loyalty and, ultimately, shareholder value. For Macy's to

continue to build a sustainable competitive advantage, it is needed to fully

understand that customers and mold the offering to satisfy each customer's specific

needs, Macy's reported same-store sales for the second quarter ended August 2

declined 2.1%. Sales in the second quarter totaled $5.718 billion, a decrease of 3%

compared with the same period last year.

As a retail clothing giant, it is difficult for Macy’s to create points-of-difference when

competing with thousands of other clothing stores nationwide; however, Macy’s has

done just that. By implementing food vendors in their department stores, they are

able to better serve their consumers with a complete shopping experience since

“market research found that Macy's customers wanted more places to rest and

refresh quickly (Byron, 2004).” This is another way to provide a complete, unique

experience when shopping at Macy’s. Customers are able to spend more time

scanning clothes when they are completing refreshed. Most people, when hungry,

have to leave the store to buy a snack. By capitalizing on fully satisfying their

customers during the entire shopping experience, this creates a unique point-of-

difference when compared to other retail clothing departments. Macy’s tries to satisfy

all of the needs and wants of customers who step into its stores. Not only do they

offer quality products, they want customers to be able to enjoy a bite to eat as well.

This enables the customers to spend more time in each store and satisfies more of

their needs, instead of solely the act of purchasing clothing items. Macy’s competes

with other large department stores including JC Penny, Sears, Gottschalks, and

Nordstrom along with several other small boutiques.

Hierarchy-of-Effects Model

Awareness Knowledge Preference Liking Conviction Purchase

Cognitive Stage Affective Stage Behavior Stage

Analysis

Four basic mistakes are prevalent in the retail marketplace today. First, and most

serious, retailers ignore the relationship between the local store and the consumers.

This strategy creates strong brand awareness but results in national retailers saying,

“Shop at X.” Although national retailers may strive to attain uniformity across all their

retail locations, looking at Wal-Mart and Macy’s, both corporate bodies stress their

commitment to and understanding of the needs of local customers.

Many times, retailers only focus on communicating their brand message to the

consumer and to their local stores, forgetting the importance of the relationship

between the local retailer and the customer. This especially includes the national

brand ignoring the actual inventories or local preferences of a particular community.

From the case studies, this is a major flaw in Wal-Mart’s marketing plan. The

national retailer controls the message at every level allowing very little opportunity for

local flexibility. This has also been the new marketing strategy at Macy’s, which has

had mixed results. Only True Value does not follow the trend and has a strategy that

has the national brand augmenting the locally advertised message.

The second major mistake that retailers make is focusing on gimmick promotions

instead of targeted campaigns to get customers into their retail stores. From the case

studies, this is another symptom of Wal-Mart and Macy’s misguided marketing

strategies. Both offer “mega-sales” to cut prices that attract consumers looking for a

seemingly great bargain. However, in many cases, the number of items in inventory

is extremely low or there is a bait-and-switch element. In either case, neither of these

situations helps the store or brand effectively builds a relationship with the customer.

In fact, instead of fostering a relationship, the gimmick practice reinforces the idea

that a customer should only shop at a retailer because they have a special one-time

only deal. This undermines any brand building and drives retailers further into

gimmick promotions – a self-perpetuating situation that drives retailers into even

more difficulties. The third major mistake that retailers make is the overuse of

coupons to lower prices or present the customer with the appearance that they are

saving money or being granted a “good deal”. This is a mistake because coupons,

only when used correctly, are an incentive for consumers to purchase more goods.

Frequent coupons or sales only create a relationship with a customer in whom the

customer only purchases goods from a retailer when they receive a special offer or a

sale is running. This is especially a problem at Macy’s where sales volume can be

increased by offering multiple discounts. However, this can create a gimmick

situation where a customer has received many coupons but may only use one for a

purchase. Ultimately, coupons may only serve to reinforce the message that

retailers’ prices are too high and must be lowered to attract customers.

The fourth major mistake that retailers make is the lack of a relevant message in a

retailer’s local advertising. This is best exemplified by Wal-Mart and Macy’s; both

retailers have marketing strategies that focus on national brand awareness with

limited control of the marketing process by store managers. While brand awareness

is important to consumers, frequently, the mediums used in national campaigns have

seen reductions in their ability to reach consumers. Many television viewers,

especially those in the 18-34 demographic use TiVo to skip commercials. In addition,

many consumers listen to satellite or internet radio to avoid listening to commercials.

Finally, newspaper circulation has seen steady decline recently with an increase in

online news sources being used for primary newsgathering. In the coming years it

will be hard to dispute that traditional advertising mediums will yield a lesser return

on investment. Overall, through an analysis of Wal-Mart, Macy’s and True Value we

can see that all three claim to have the highest national priority placed on the local

success of each store, it appears only True Value has made significant strides in

establishing local relationships with customers. While Wal-Mart and Macy’s make

extravagant claims of locally focused retailing, they present little evidence besides

helping local charities to demonstrate their understanding of the community and

market they compete in.

It is also important to note that although these are only three examples, these trends

carry forth in general studies performed across retail chains in a variety of industries.

COMPETITION

Macy's direct competitors include other middle priced-ranged department stores

including JC Penny Nordstrom and Dillard's. However lately they have been losing a

significant amount of market share to discount stores such as TJ Maxx and

Marshalls due to the declining economy.

DISCOUNTERS. Discounters like Wal-Mart and warehouse retailers like Costco

compete head to head with Macy’s on Macy’s low end products.

LUXURY STORES. Luxury stores like Neiman Marcus and Nordstrom appeal to high

end shoppers by creating a desirable experience and offering exclusive

merchandise.

SPECIALTY STORES. Specialty stores focus on a more narrowly grouped set of

merchandise. For instance, Circuit City focuses specifically on consumer electronics.

MAILORDER. Mail order retailers like Crew, Plow and Hearth and Crutchfield offer

quality merchandise, competitive prices and arrive right or your doorstep.

PURE PLAY INTERNET RETAILERS. Pure play internet retailers like Amazon.com

and Buy.com are attacking nearly all department store merchandise lines with the

exception of private labels.

J C PENNEY

INTRODUCTION

As the nation's fourth largest retailer, J. C. Penney Company, Inc. earns more than

50 percent of its revenue in department store offerings, which include apparel,

accessories, and home furnishings. J. C. Penney also has the largest U.S. catalog

operation, which accounts for 13 percent of the company's revenue. Additionally, the

company owns the fourth largest U.S. drugstore chain, Eckerd Corporation, which

generates roughly one third of J. C. Penney's revenues. Topping off this ensemble,

J. C. Penney derives 3 percent of its revenue selling insurance, and the insurance

division continues to post record profits.

Under its "new models for profitable growth" philosophy, J. C. Penney wants to

capitalize on other proven money makers and cut back on under performers. After

closing 75 stores in the United States, the company plans on expanding its

international operations, which include stores in Puerto Rico, two stores in Mexico,

and one in Chile. J. C. Penney has also upgraded its fashion line and added more

private-label clothes to its mix. Like many other retailers, the company offered an

early retirement program and thinned out its management ranks, which is expected

to save $85 million annually.

HISTORY

 

Modern JCPenney stores are a far cry from the small dry-goods store that James

Cash Penney opened in Kemmerer, Wyoming in 1902. In those days, frontier miners

and farmers and their families turned to JCPenney for blue jeans and other work

clothes, shoes, fabrics and sewing needs. Today, busy working families turn to

JCPenney in cities, towns and suburbs and to jcp.com for affordable fashions and

home accessories.

 

Originally, Mr. Penney called his stores the Golden Rule because it was his personal

and business philosophy to treat others the way he himself would want to be treated.

In 1913, his growing chain of stores incorporated in Utah as the J. C. Penney

Company, Inc. and the Golden Rule name was phased out. In 1914, the Company

moved its headquarters from Salt Lake City to New York City to be closer to its major

sources of merchandise. Since 1992, the Company has been headquartered in

Plano, Texas.

 

As JCPenney grew, it became “A Nationwide Institution,” as one of its early logos

proclaimed. At one time, more than 2,000 JCPenney stores dotted Main Streets and

downtown shopping districts across America. After World War II, the Company

followed its customers into the new suburbs, and later into regional shopping malls.

The JCPenney catalog debuted in 1963, and in 1994, the forerunner of today’s

jcp.com began offering merchandise via the Internet.

 

JCPenney’s commitment to serving its customers with style, quality and smart prices

has led the Company through many transformations over the years as society and

shopping habits change.

CORPORATE VISION

Our vision for growth is to become America’s shopping destination for discovering

great styles at compelling prices. To support this vision we have updated our Long

Range Plan to guide our actions over the next five years

Long-Range Plan Fact Sheet- mission

2010-2014

JCPenney’s vision for growth is to be America’s shopping destination for discovering

great styles at compelling prices. Currently, JCPenney does business with over half

of the households in America each year. We’re focused on getting those customers

to spend more with us, while also finding ways to engage the other half to

experience our great style and quality at smart prices. To do this, we are focused on

a Long-Range Plan consisting of four integrated business strategies intended to

drive profitable sales growth, enhance our financial performance and achieve

industry leadership:

Brand-expansion strategies

This kind of cross-channel synergy can also prove helpful during the launch of

private-label or exclusive brands, something JCPenney is featuring more of these

days.

Using a synchronized approach across channels "is how we launch a brand today,"

says Last, pointing to the introduction earlier this year of JCPenney's new fashion-

forward lingerie concept Ambrielle as an example. In addition to in-store, print and

electronic-media elements of the launch, "the Internet was the underlying hub that

tied the pieces together," Last explains. An Ambrielle microsite features ads for the

brand, links to product and a bra-fit tool.

Another way of converting in-store shoppers to JCP.com is through a feature

recently introduced that enables an online shopper to determine whether a desired

item is in stock in a selected size or color at a nearby store.

None of this is to suggest that JCPenney doesn't still value its direct mail heritage.

While JCPenney has been reducing its direct mail circulation over the past few years

in favor of less-costly e-mail communication with customers, it still drops more than

70 catalogs yearly, including one of the few remaining Big Book catalogs, available

upon request. In 2006, the company's catalog sales were also over $1 billion.

However, that number is down from a reported high of $4 billion in the late 1990s.

In addition to JCP.com, JCPenney is focused on the Internet because the chain is

also pursuing a strategy of introducing more smaller, off-mall stores.

Smaller stores, bigger footprint

JCPenney is planning to add 250 new stores by 2011, nearly 80 percent of which will

be in off-mall locations.

The stores typically are on one level, come in at around 100,000 square feet and

feature wide aisles and central checkouts to enable customers to come and go

quickly. The company has reported that its off-mall stores average $250 in sales per

square foot compared to $160 per square foot for all JCPenney's stores. However,

since they won't be able to offer the full assortment of merchandise found in a larger

store or even online, programs like the one in the infant department and tools like the

new point-of-sale terminals with Internet access will help bridge that gap.

Of course, none of this would mean anything if JCPenney's merchandise assortment

and marketing message weren't hitting the mark with customers.

"Being the leader and knowing our customers is essential because it's the basis for

everything that we do," Mike Boylson, JCPenney's executive VP/CMO, said during

the company's analyst meeting in April. He added that the company's "customer

intelligence, data, insight, measurement tools, scorecards, customer-file

management and purchase behavior is a strategic advantage that is hard to

replicate."

For example, mining its wealth of data, the company recently tested making

customer selections for its direct mail campaigns based on who would drive the most

profitable sales, not who was most likely to respond. Results have been positive,

with higher total sales.

To gain further customer understanding, JCPenney last year combined its

intelligence with data about how consumers feel about brands from Saatchi &

Saatchi, the chain's new agency of record, to try to connect on a more emotional

level with customers. The strategy bore its first fruit in recent weeks with a targeted

approach, launching an integrated marketing campaign intended to extend the

multichannel merchant's emotional connection to kids and teens. This latest

campaign follows the spring launch of JCPenney's new tagline, "Every Day Matters,"

and an accompanying marketing campaign.

JC PENNEY’S MARKETING FUNNEL

clearly the logic and marketing approaches that successful large retailers can utilize

to more efficiently fine tune their campaigns.  First he outlined the key benefits of

direct mail in a marketing mix, and those aspects that complement other branches of

a campaign.

Specifically, he touched upon the use of their own customer data, to sort of outline

their strategy for them.  By looking at patterns and segmentating customers into

either “profiles” or just “behavioral groups”, JC Penney is able to serve the most

personalized ad (or shopping experience) po ssible. 

Direct mail is very important to us because it’s through versioning and through

customer segmentation we are able to send out very targeted messages that are

highly accountable. We are able to track our results in direct mail to a degree that we

can’t do in a lot of our more traditional mass media.

This strategy is as clear as day, and makes a great deal of sense.  Essentially, the

steps are 1) use Mass Media (TV, radio, consumer direct mail) to attract / acquire

customers  then 2) Use targeted media (email, social media, targeted/variable direct

mail) to build loyalty and increase revenue with those acquired customers.  The

intangible thing that the outbound mass media provides is that it reinforces the brand

image with current customers – hard to track, but always a plus.

MARKETING STRATEGY AND MEDIA PLAN 

The media plan of JC Penney has some strong points and some weaknesses . The

strengths are that the advertisements endeavor to position JC Penney  as a fashion

store . On the other hand there are some media tactics that  detract from the

positioning it hopes to achieve . What is proposed is  that JC Penney should desist

from using techniques that do not support  its overall marketing strategy . On the

other hand the media mix and  communications strategy of JC Penney should be

focused more on  positioning the company as a fashionable company (Muldoon . K ,

2006 . Finally , metrics should be developed to monitor the implementation and 

effectiveness of the media plan . The marketing strategy of JC Penney is to target

middle level consumers . Its pricing strategy does not target the premium segment

like some of  its competitors like Marcy 's , Dillard 's , and Belk , nor does it focus on 

discount store customers like Wal-Mart . The direct competitors of JC  Penney are

Kohl 's and Sears . In addition , the distribution strategy of  JC Penney stores is to

locate the stores in suburban malls . This  strategy is a change from the traditional

strategy of locating the JC  Penney stores in downtown area . Currently , JC Penney

has also started  opening some standalone stores (United Nations Publications 2005

. At  the same time , JC Penney has started selling its products on the 

internet . JC Penney has been particularly successful in selling  furnishings and

apparel through the internet . It has emerged as one of  the most successful ``hybrid

' internet marketers . Its sales crossed the 1 billion mark in 2005 . As far at the

product strategy  of JC Penney is concerned it has started concentrating on brands

like  Arizona Jeans , Worthington , and St . John 's Bay . JC Penney has moved 

away from its drug stores business by selling off its Eckerd division .

In addition , the strategy of JC Penney is to develop reposition itself  as a premium

store . It sponsored the surfing star Thomson to support a  proprietary brand ,

entered a joint venture with Sephora and a premium  casual wear brand for women

Studio . A part of the marketing strategy of JC Penney is to launch its back to  the

school campaign in which school children are targeted . As a part of  this campaign

JC Penney is trying to move up its image on the premium  dimension by offering

brands like Miss Bisou , Levis , South Pole , and  Fang . In addition , JC Penney is

selling school uniforms in partnership  with IZOD . JC Penney promises to take care

of special size needs of  uniforms . The premium denim for the back to the school

segment is  buttressed by Young Men 's .

5-year turnaround plan: apparel program credited with producing results

PLANO, TEXAS -- Progress in reviving JCPenney stores upon entering year three of

a five-year turnaround plan remains on track, with the chain noting its second

consecutive gain last year in comparable-store sales, despite tough competition and

a stubborn economy.

Enhanced marketing, the rollout of a more energized store look, centralized buying

and improvements in trendright merchandising all helped to grow comps 2.6% in

2002.

"Clearly our performance last year showed we are back in the game. We're building

real points of difference we believe between us and our competitors," said Vanessa

Castagna, evp and ceo for JCPenney stores, catalog and Internet.

Speaking at the company's two-day analyst meeting last month, Castagna said

JCPenney's mission is to be the dominant mall-based retailer of fashion at moderate

prices. That requires on-target and timely interpretation of trends, which is happening

due in part to centralized buying, she said.

Further, JCPenney's strategy involves emphasizing points of differentiation from

competitors through exclusive brands and dominant businesses.

JCPenney intends to grow categories in which it has a dominant market share

position, including window coverings, home, intimate apparel, fine jewelry, men's

suits and special sizes in apparel. A mix of fashionable national, exclusive and

private brands serves as another differentiator for the chain.

The recently launched exclusive Bisou Bisou brand in contemporary sportswear is

one example of how JCPenney is offering fashion at a value. Another is The

Havanera Co., a newly added private label in men's contemporary casuals that

targets Hispanic males.

"We want to be first and we want our customers to trust us for trend-right

merchandise," explained Lana Cain Krauter, evp and gmm in men's and children's

apparel.

Changes in the store look that began last year with centralized checkouts, improved

visuals, use of high-capacity fixtures and "hot spots" to emphasis key items are

making an impact, according to executives. Meanwhile, JCPenney recently exited its

unprofitable cosmetics business and is replacing that with expanded assortments in

fragrances, bath and body, women's accessories and fashion jewelry in this "center

core" area.

Behind the scenes, the company is benefiting from technology upgrades and a

transition to an internally operated distribution network that supports its new

centralized model. Expense control has been another emphasis, including changes

in staffing adapted to store traffic.

As for JCPenney's catalog business, revival has proved more challenging. This $2.6

billion segment declined 22% in sales, while Internet sales grew 18% to $381 million.

Changes in the catalog division include the addition of smaller targeted supplements,

improving the assortments, pricing and graphics of existing books and

implementation of new payment policies to cut back on returns and enhance profits.

Though a sales decline of up to 10% is forecast this year, the division expects a

rebound in 2004.

JCPenney ceo Allen Questrom said the company is committed to the catalog

business, which provides another point of differentiation.

In fact, the retailer's three-channel shopping via stores, catalogs or the Internet will

be promoted more going forward.

"We do not give up on things, and we do not change strategy every time the wind

blows the wrong direction," Questrom said.

And despite hype about the death of mall retailing, Questrom said he is convinced

JCPenney will continue to grow, with the majority of its 1,049 department stores

located in malls. Interestingly enough, however, JCPenney this year will open three

freestanding stores as a test, perhaps in response to the strong gains made by

retailers like Kohl's.

Meanwhile, aggressive marketing efforts will continue to drive traffic into stores.

Advertising spending will increase up to 10% this year, with plans to add new

commercials that better promote the personalities of its key brands, such as Arizona

in juniors.

Despite gains on several initiatives, JCPenney executives remain conservative in

their outlook, given the tough economy. The retailer is forecasting a 2% gain in

comps this year, though sales so far have been soft. Comps declined 2.1% in

February and 5.5% in March. Executives are highly optimistic, and convinced the

company is heading in the right direction.

"We've really come a long way in the last two years," said Castagna. "We know our

strategy works."

At least one analyst was skeptical, however, as to JCPenney's ability longer term to

compete against formidable off-mall players that include Kohl's, Target and Wal-

Mart.

"Over the past two years, JCPenney department stores have been a bright spot in

broadlines retailing, with comps that outshined department store competitors," wrote

Deborah Weinswig, an analyst for Smith Barney. "However, after missing its comp

plan for the past three months, we feel that the department stores have lost their

luster and are no longer bolstering investor confidence in JCPenney stock."

Recent sales weakness may be due in part to increased competition and improved

merchandise offerings among discounters targeting the moderate customer,

Weinswig added.

CUSTOMER PROFILE

Customer profile based on “Missing Middle” Strategy

The driving force behind Penney’s decision to focus on the Missing Middle comes

from research the retailer did to define/understand its target customer better.

According to JC Penney, the Missing Middle customer is:

Female

Age 35 – 54

$69K household income

married, with kids

seeks stylish, but not too trendy casual clothes

wants high-quality, form-fitting clothes that aren’t too tight

To serve the Missing Middle market, Penney’s is working with well-known designer

Nicole Miller on an exclusive line of moderately priced and more than moderately

stylish casual woman’s clothes. Penney’s has also added exclusive home

furnishings from Chris Madden and Colin Cowie.

With private label goods comprising 4% of company sales, Penney’s is introducing a

new private label band, “W – Work to Weekend” to better serve the Missing

Middle audience.

These efforts to fine-tune its retailing strategy reflect the latest phase in a four year

revitalization plan. Results so far have been positive for JC Penney as third-quarter

earnings grew 86% and January year-over-year sales rose 3.3%.

JCPenney Transforms Catalog Strategy to Better Serve Customer Preferences

PLANO, Texas (Nov. 18, 2009) – As part of its effort to continually adapt its

marketing strategies to meet evolving customer preferences, J. C. Penney

Company, Inc. (NYSE:JCP) has taken steps to further reshape the way it engages

with customers through an integrated marketing approach that incorporates stores,

catalogs, online applications and emerging digital marketing platforms, including

social media. 

Increasingly, catalog shopping has converged with online and in-store shopping as

customers view catalogs as “look books” and inspiration sources for their in-store

and online purchases. In response to this convergence and the ongoing migration of

customers to shopping online, JCPenney will no longer publish its twice-yearly “big

book” catalogs and will dedicate those resources to a range of customized, more

timely specialty catalogs, continued targeted growth initiatives on jcp.com and

ongoing leading-edge digital media services. 

The discontinuation of "big book" catalogs aligns with JCPenney's ongoing

commitment to promote the sustainability of forests and other natural resources, and

builds upon its legacy of operating in an ethical and socially responsible manner. The

Company anticipates a year-over-year reduction of 25 to 30 percent in paper used

for catalogs in 2010 – continuing a four-year trend of declining paper consumption. 

“To ensure we are keeping pace with consumers’ changing media habits and

continued migration to online versus catalog shopping, we have increased our

investments in new technologies, as well as successfully integrated the

merchandising and marketing teams serving stores, jcp.com and catalog into one

enterprise-wide team that is able to consistently and seamlessly serve our

customers, no matter how they prefer to shop with us,” said Myron E. (Mike) Ullman,

III, chairman and chief executive officer. “Part of this transformation is the refocusing

of our catalog operation to smaller, more targeted publications, providing us with a

strategic opportunity to continue reducing our overall paper consumption and

transportation-related environmental impacts. We remain committed to constantly

analyzing the impact of our overall environmental footprint and upholding the

principles and discipline that have helped sustain and build JCPenney into a trusted

brand for over 100 years." 

Highlights of JCPenney’s Direct-to-Consumer Marketing Evolution 

“We are constantly evolving our marketing approach to capitalize on new

technologies and customization strategies that allow us to be in more frequent and

effective contact with our customers,” said Mike Boylson, executive vice president

and chief marketing officer. “Big book catalogs have become less relevant as

customers have embraced shopping online, where they have ready access to our

entire assortment at any time on jcp.com, one of the nation's largest general

merchandise sites on the Internet. At the same time, customers greatly appreciate

the smaller, more personalized catalogs we have introduced as well as digital and

mobile applications that make it easier, more convenient and fun to shop with us.” 

Ongoing Growth of jcp.com and Digital Outreach: As JCPenney’s largest, most

dynamic store, jcp.com is one of the largest general merchandise sites on the

Internet, with more than 250,000 merchandise offerings and millions of opt-in e-mail

subscribers. Additionally, JCPenney has developed a range of digital marketing

initiatives, such as an iPhone application launched this year and presence on social

media sites such as Facebook, where JCPenney has so far amassed a following of

more than half a million fans. 

Broad Array of Specialty Catalogs: A roster of specialty catalogs includes a range of

home catalogs to support JCPenney’s leadership in home lines, such as “Rooms

Babies Love” and the cooks® catalogs; the “Little Red Book” publications for

women’s apparel and accessories; and “Matters of Style” for men. Other popular

catalogs, including the Christmas catalog, will continue. 

SURVIVAL STRATEGIES FOR MACY'S AND PENNEY'S,

The stores' strategies vary. So do their prospects for success. Much depends on

how vulnerable they are in the first place.

Specialty apparel stores are struggling, too. Even though some clothing, especially

for growing kids or for career women, is regarded as essential, sales figures suggest

that many of those purchases was being postponed to cut the cost for added stock

during the recession period.

"The retailers accept that we're in a recession — smack in the middle of it," Riley

says.

Among the most visible ways that stores tried to ease their pain from the spending

slowdown:

•Merchandise. Retailers must take care not to stock too little of the latest hot fashion

or product — or showcase it too late. Many stores,

•Pricing. Even retailers that try to avoid across-the-board price slashing are

embracing the deep discounting trend, which Wal-Mart capitalized on so successfully

last fall and holiday season.

•More consumer input. Retailers can't afford to wait until the end of a season to

determine which trends will prove most popular. Stores are stepping up consumer

research and using their websites to gather real-time opinions from shoppers.

Thanks to luck, foresight or a bit of both, some retailers are better positioned to

manage a downturn. Those with low, low prices — think Wal-Mart and off-price

retailers including T.J. Maxx— and those that cater to the wealthy are tending to

outperform those in the middle.

But opportunities exist for midlevel retailers, too. If shoppers are trading down to

Wal-Mart, as its sales suggest, then more affluent people may be ready to cut back

on their Bloomingdale's trips in favor of Kohl's. Tough economic times tend to

diminish loyalty to stores across the spectrum.

"In this type of economy, the super shoppers get coupons out and check things

online; they're going to be loyal to themselves first," says Phil Rest of the consumer

insights firm BIG research. "Everyone's trying to find ways to make their money go

as far as they can so there's something left for things they really want."

Christopher Maddox of Washington, D.C., says he's not giving up on Macy's , one of

his favorite retailers, but is being far more cautious about his purchases this year.

"I'm only buying essentials due to the economy," Maddox says. "Luxury and big-

ticket items are not in my budget due to increased costs of gas, food and utilities."

What follows is a look at the strategies of four retailers — Target, J.C. Penney,

Macy's and Neiman Marcus — that draw from often-overlapping segments of

shoppers.

As they brace for a possible recession, these stores are re-examining, in particular,

four areas that will be most evident to shoppers: inventory, staffing, store openings

and promotions.

J.C. Penney

Damn the economic naysayers, J.C. Penney is designing its most ambitious five-

year plan for store openings in its history and last week oversaw its largest-ever

merchandise launch. Still, facing a persistent drop in consumer spending, CEO Mike

Ullman says the chain is scaling back those store openings from 50 to 36 this year

and will adjust its inventories to reduce the need for hefty markdowns.

Ullman hopes that Ralph Lauren's new American Living fashion, home and footwear

line for men, women and kids will further invigorate the Penney brand, which has

drawn more and younger customers with the addition of the Sephora makeup line

and two private-label lingerie lines designed, in part, to compete with Victoria's

Secret. The American Living line will be found in 600 of the chain's 1,000 stores,

often with its own in-store shops.

Deutsche Bank senior retail analyst Bill Dreher questions whether now is a good

time for Penney to launch a line that's about 25% higher-priced than similar

merchandise already in its stores.

Under the deal, Ralph Lauren's name won't appear anywhere on the new

merchandise or displays, Dreher notes. Kohl's, by contrast, was able to connect the

Lauren name with its Chaps line for many years, which helped keep customers

aware of the connection. The new line is "no panacea," he says.

Still, Dreher notes, Penney has successfully reinvented itself over the past decade

from a chain known for "dowdy, older-lady-type fashions to one that's very much hip,

on-trend and cool." More recently, Penney has recognized that its catalog business

is less important now than its website, he says.

About six months ago, Penney decided to merge its store, catalog and online

marketing operations; the change will result in 100 to 200 job losses. Ullman insists

it's "not a cost-driven exercise," but rather one that'll give shoppers "one view of our

merchandise."

Macy's

The nation's largest department store chain concedes that the economic slowdown

has forced it to put off plans to scale back its sales and promotions.

"We still believe the strategy is a good one, but the timing not necessarily good,"

says CEO Terry Lundgren.

In 2006, Macy's said it was trying to wean customers off frequent sales in favor of its

"Every Day Value" pricing. Though Lundgren says there were slightly fewer

promotions in 2007 than in 2006, he says Macy's won't reduce the timing or the

number of sales until consumer spending starts to bounce back.

All the great deals now in stores are one benefit of the depressing economic news,

says Marietta Landon of Cambridge, Mass. She finds sales everywhere she goes.

"Especially Macy's — they make every weekend a sale with saving passes and

advertising galore," Landon says.

Macy's says its plan, announced earlier this month, to eliminate 2,300 management

jobs in the company's central office and create 250 new ones in its local markets

wasn't necessarily driven by the economy. But saving about $100 million a year sure

doesn't hurt. The plan to localize decision-making "was conceived long before there

was talk of a credit crunch or mortgage crisis, but executing it now in the face of a

possible recession does have its benefits," says Macy's spokesman Jim Sluzewski.

The addition of Tommy-Hilfiger-branded men's and women's apparel this fall, which

will make Macy's the only place to buy the brand in the USA outside of Hilfiger

stores, should further boost sales, he says.

Macy's has also announced plans to close nine poor-performing stores this year.

Though struggling with some of the same issues that its rival J.C. Penney faces in

catering to the middle class, Macy's holds an advantageous position, says Phil Rist

of BIGresearch. That's because Macy's enjoys the image of being something of a

novelty in many areas since it renamed the former May department stores in the fall

of 2006.

Its clientele is generally more affluent than Penney's, notes analyst Bill Dreher. Still,

in times like this, even a Macy's will likely be hurt by the tendency of customers to cut

back on non-essentials.

"All the department stores are vulnerable because they are about 80% apparel and

20% home goods," Dreher says. "After years of strong apparel sales, customers

have full closets, and with.

Direct Competitor Comparison MDD

S

PV

T1

SK

S

Ind

ustr

y

Market Cap:10.

30B

1.83

BN/A

1.45

B

17.8

5B

Employees:

161

,00

0

29,3

23

154,

0001

9,67

2

154.

00K

Qtrly Rev Growth (yoy):7.2

0%

-

2.40

%

N/A5.10

%

11.7

0%

Revenue (ttm):24.

24B

6.17

B

17.5

6B1

2.70

B

21.2

7B

Gross Margin (ttm):

40.

90

%

35.7

0%N/A

39.2

1%

39.2

1%

EBITDA (ttm):2.9

0B

529.

07MN/A

188.

99M

2.73

B

Operating Margin (ttm):7.1

0%

4.37

%N/A

2.39

%

10.0

0%

Net Income (ttm):

601

.00

M

143.

19M

251.

00M1

-

11.7

4M

N/A

EPS (ttm):1.4

11.99 N/A

-

0.083.30

P/E (ttm):17.

25

13.8

8N/A N/A

13.5

2

PEG (5 yr expected):1.4

22.47 N/A

17.1

1

17.1

1

P/S (ttm):0.4

20.27 N/A 0.52 0.84

 

DDS = Dillard's Inc.

Pvt1 = J. C. Penney Corporation, Inc. (privately held)

SKS = Saks Incorporated