A New Face for Bullock’s : Macy’s raises eyebrows by trying to recast the chain in its own image.
If Bullock’s department stores are starting to look a lot like Macy’s, it’s no accident.
The big New York retailer--known for its flashy, moderately priced department stores--bought the upscale Southern California chain last May and has been busily putting its imprint on the 22 stores.
Out is the understated, less-is-more merchandising style that was a Bullock’s trademark. In are splashy graphics and racks and shelves bulging with goods.
Out are Bullock’s genteel, sketched newspaper ads. In are bolder ads featuring photographs.
Out are house brands such as Allen Solly, which were Bullock’s staples when it was still part of Federated Department Stores. In are Macy’s private labels--Charter Club, Club Room and Fantasies by Morgan Taylor--which are new to Southern California but familiar to customers in the Bay Area and elsewhere.
The changes leave some observers scratching their heads. One former Bullock’s merchant, now with a rival chain, sniffs that “the stores don’t look anywhere near as good or crisp or updated. Stocks are looking more mundane, less unusual. All the special things are going out of there.”
Given Bullock’s strong profits under the old regime, some wonder, why does the new owner insist on overhauling the place? Bullock’s succeeded by being a distinctive regional chain. Why risk making it a Macy’s clone?
To Macy’s top executive, such reaction smacks of sour grapes.
“We’re trying to build a great business that will go on and on,” Edward S. Finkelstein, chairman of R. H. Macy & Co., said in a recent interview at the Bel-Air Hotel. “We’re really doing the things we hope will make the business grow and be successful over the next several years.
“We added a really fine business,” he went on. “The last thing we want to do is dramatically change or hurt that business.”
If anything, a source at Bullock’s says, Macy’s is aiming to enhance, not downgrade, the chain’s upscale image. “We’ve gone after the better customer,” he said. “We’ve moved decidedly more toward better and designer” clothing. The store, he noted, chose not to bring in some moderately priced house brands from Macy’s.
Different Styles
Still, “there’s no question that Macy’s style is different from Federated’s style. But there’s room for a lot of different styles,” said Edward A. Weller, a retailing analyst with the Montgomery Securities brokerage firm in San Francisco.
Shoppers interviewed outside the Bullock’s in Westwood recently said they had not noticed the increase in merchandise or the new house brands, but they did have various impressions about changes at the stores.
Carol Pincus of Westwood said the store “doesn’t look the same,” but the main difference she has noticed is that “the salespeople are more aggressive.” Kelley Younger of West Los Angeles said she senses that markdowns on designer clothes are not as “generous” as they used to be.
Meanwhile, Carol Morehead, who lives in Irvine, complained that the Pasadena store “has just gone downhill” and “is sort of like Macy’s now.” But she praised the service at the South Coast Plaza Bullock’s, where a saleswoman ordered her a dress that service-minded Nordstrom could not locate. “Bullock’s was able to outdo Nordstrom,” she said. “I’m surprised.”
Macy’s can argue that it must be doing something right.
Bullock’s sales gains, Finkelstein said, have been outpacing those of the rest of the Macy’s organization, which, along with other retailers, has suffered through months of slow business blamed on lackluster sales of women’s clothing. That business now seems to be staging a modest turnaround but is still far from robust, particularly in some of the private-label commodity sportswear that Macy’s produces in hefty quantities.
Sales Up Since Acquisition
In the nine months since the acquisition, percentage sales increases at Bullock’s, which has annual revenues of about $800 million, have been in the high single digits. (The 25-store Macy’s California chain in Northern California, by contrast, eked out only a 2.3% gain for the period of last Aug. 1 through Jan. 14.)
Finkelstein declined to comment on Bullock’s profitability except to say with a laugh: “It was profitable when we got it, and we haven’t screwed it up yet.”
Still, Finkelstein and Macy’s, which converted to private ownership in 1986 in a $3.5-billion buyout that loaded the company with debt, have been taking heat from bondholders over the Bullock’s purchase. Investors note that the $1.1-billion acquisition of Bullock’s and two specialty fashion chains, Bullocks Wilshire and I. Magnin, added to Macy’s indebtedness just as the company was headed into rougher seas. Its debt now totals $4.5 billion, compared to $3 billion in 1987.
“Macy is not on the death bed,” said Barre W. Littel, a bond analyst with First Boston Corp. in New York. However, he added, the market is apprehensive because the company lost momentum and suffered losses during its failed effort last year to buy Federated Department Stores. Federated went instead to Toronto’s Campeau Corp., which sold Bullock’s, Bullocks Wilshire and I. Magnin to Macy’s.
Documents filed with the Securities and Exchange Commission paint a bleak picture. For the first quarter ended Oct. 29, 1988, Macy reported a loss of $19 million, compared to earnings of $6.4 million for the same period a year before. Sales rose to $1.6 billion from $1.4 billion.
‘Buckling Down’
Finkelstein defended the company’s debt level and ability to make interest payments.
“Our debt is fixed,” he said. “Our costs are so under control, we don’t have a problem. Sure, I’d love to be debt free, but we have far more financial resources than are necessary for running our business.
“We’re in a phase of buckling down and running our business,” he added.
As far as Bullock’s is concerned, that means, among other things, negotiating for three or four new sites, including at a development in Marina del Rey that sources figure is still at least two years away.
It also means fine-tuning Bullock’s merchandise-buying strategy. Macy’s was roundly scored for moving most buying responsibilities for the Southern California chain to its Atlanta offices. (Most advertising and promotion activities for Bullock’s were also recently moved to Atlanta.)
Some Bullock’s devotees feared that the distinctiveness developed under former Chairman Allen Questrom, now president and chief executive of Neiman Marcus, would be lost to an approach that ignored regional tastes.
But Finkelstein maintains that the strategy is workable. He noted that Bullock’s depends on its three small regional buying staffs--housed in the stores in Sherman Oaks, Del Amo and Santa Ana--”to take care of local needs.”
Although Macy’s initially trimmed some Bullock’s buyers, it has since boosted the overall number back to near original levels. (It has also added about 300 salespeople, by one estimate.)
Macy’s considers Bullock’s a laboratory and plans eventually to roll out the buying strategy to its other units, in the Northeast, Southeast, Midwest and Northern California, he added.
But at least one Los Angeles clothing manufacturer was relieved when regional buyers took over responsibility for his lines.
Being bought out of Atlanta was a “frustrating ordeal,” said Allen B. Schwartz, chairman of A.B.S. Clothing Collection Inc. “For junior or contemporary clothing,” that buying system might work fine, he added. “But when you start to deal with fashion and updated clothing, I personally think it’s better to work closer to the region you’re in. The California woman really is so different.”
Finkelstein said he plans to continue coming to California to take the pulse at Bullock’s. During a trip in January, the fourth since the takeover, Finkelstein met with Bullock’s headquarters personnel and even had lunch with Mayor Tom Bradley.
To date, Finkelstein has kept name changes at Bullock’s to a minimum. Here and there, a department has a new title. Emphasis, for example, featuring trendy, casual fashions, is now Expressions. But so far, there is no sign that the store itself is likely to get the Macy’s moniker, as have other regional chains that Macy’s has purchased in the Northeast and Southeast.
“I don’t see any reason to change it,” Finkelstein said. “There’s no advantage.”
