Macy's Herald Square turns 100, tries to get its house in order

NEW YORK — As regular shoppers at Macy's famous Herald Square, Donna Tritto and Etty Weiner are lavish in their praise, but they also have their gripes.

Although Tritto describes the store as "a place where you can find everything" from bathroom accessories to shoes and children's clothing, the Marlboro, N.J., resident bemoans "the store is too messy."

For Weiner, a Queens resident, it's a hometown icon, with the "best offerings of moderate-to-better-priced merchandise," but specialty stores like Banana Republic are "easier to get in and out of."

As the world's largest department store celebrates its 100th anniversary this week, it is a symbol of what's right and what's wrong with the badly bruised department store sector. There's a lot of magic in the name, but the store is also regularly equated with the industry's woes: messy departments, poor service and lack of innovative fashion.

To reverse its fortunes, Macy's faces the challenge of keeping the magic alive while also making sweeping changes to update the flagship and the rest of the chain amid increasing competition.

"There is no doubt that business is tough. When business becomes mature, it gets difficult. Department stores are a mature business," said Hal Kahn, chairman and chief executive of Macy's East, a division of Federated Department Stores Inc. But a big part of the problem, he says, is that the brands themselves are mature, and he's using the centennial, which marks the flagship's opening on 34th Street on Nov. 8, 1902, to heed the call for innovation.

As a result, starting in January, Macy's will create more room for newer, fast-growing lines, such as urban labels like Rocawear and Sean John, and cut back on more mature lines that are struggling with sluggish sales.

Kahn said Macy's is attracting teens with the latest jeans and other trend styles, but it needs to woo back customers in the 30-to-45 age range with such modern brands as Kenneth Cole and D&G.

Macy's also plans to improve customer service by adding staff devoted to folding and helping customers find the right sizes, and testing new checkout formats and larger fitting rooms.

The department store is hoping to make pricing less confusing by reducing the number of coupons by 35 percent this fall, and Kahn wants to eliminate all coupons within two to three years.

At the Herald Square store, which has 1.1 million square feet of selling space and 10 1/2 floors, Kahn wants to capitalize on its status as a popular-priced major department store in Manhattan. He wants to bolster urban lines and further expand the women's shoe department to include, for example, more walking shoes, and bring back electronics, focusing on flat-screen TVs and home theater systems.

Reinvigorating Macy's Herald Square and the company's other stores isn't going to be easy. The sector, which enjoyed a renewal in the mid to late 1990s by latching on to once high-flying brands such as Tommy Hilfiger and Nautica, is now seeing those labels experience tepid growth. Department stores are also struggling to compete with Wal-Mart Stores Inc. and inexpensive, chic discounters like Target.

Moreover, department stores have been bruised by the casual trend in the workplace, which has hurt sales of men's and women's suits, hosiery and dresses.

"There's no doubt that the customer is changing. Career isn't what it used to be," Kahn said.

Before last year's terrorist attacks, the Herald Square store was posting gains of 5 percent to 6 percent. For several months after the attacks, sales were down by double digits, but they finally leveled off last quarter, unchanged from a year ago.

Booming teen apparel sales has helped offset the still-sluggish tourist business, which accounts for 30 percent of the store's total revenues.

Clearly, the flagship, which generated $550 million in sales in 2001 and is the city's third-largest tourist attraction behind the Statue of Liberty and the Empire State Building, is the company's showcase. About 35,000 shoppers pass through the store daily, Kahn said. And the store, which takes up the entire block bounded by Seventh Avenue, Broadway, 34th and 35th Streets, is smack in the middle of a fast-growing retail mecca that includes Gap, the soon-to-come Victoria's Secret, Swedish retailer Hennes & Mauritz and Zara.

At the same time, with consumers bombarded by so many store brands in the area, Macy's realizes that it needs to highlight hot, young lines not overly distributed elsewhere. That will be particularly tricky at Herald Square, given its size.

The flagship's top 12 suppliers account for 25 percent of the business. Kahn declined to comment on the names, but labels like Tommy Hilfiger, Polo Ralph Lauren, Jones Apparel and Liz Claiborne all have big presentations.

Of course, turning to untested suppliers is no sure thing, either, but Kahn said, "It's better to take a risk than to take no risk at all."