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Macy's Investing $400 Million to Remodel NYC Flagship

November 2, 2011

Macy's Herald Square is one of America's most famous department stores. Tourists visiting New York have it high on their lists of places to visit and, of course, it is the central point for the retailer's annual Thanksgiving Day parade. Now, the flagship is about to get bigger and shinier with a four-year remodeling project that Macy's expects will cost $400 million.

"The excitement, size and scale of this remodel reinforces our conviction that Macy's Herald Square is and will remain a retail store in a class by itself. It is our company's most productive store, and experience shows that improvements in this location consistently result in higher customer traffic and sales volume," said Terry Lundgren, chairman, president and chief executive officer of Macy's, Inc., in a press release. "Our upcoming top-to-bottom remodel represents an investment in the future growth of our business as New York City continues to evolve as a world capital and shopping destination."

Among the changes planned at the Herald Square store are an additional 100,000 square feet of selling space. (The current store is 1.2 million square feet.) Macy's plans to use space currently used for offices and stock while extending the mezzanine level in the store.

Macy's is also looking to create the world's largest women's shoe department, add a new hall of luxury brands, restoring the "great hall" on the first floor with new presentations for cosmetics and jewelry.

The Herald Square store will feature technology and new media upgrades, including interactive store directories, live video feeds of Macy's events and more. The eighth and ninth floors will continue to house home merchandise complete with an upgraded demonstration kitchen and the De Gustibus Cooking School.

"Our design of the new Macy's Herald Square reflects how a new generation of customers prefers to shop. In many cases, product will be organized by lifestyle to help customers create looks and build wardrobes across categories. On every floor and across departments, our shopping environment will be new, fresh, interesting and entertaining," Mr. Lundgren said.

While much of what Macy's is doing is focused on the new, the retailer is also paying homage to the store's history with a restoration of the "Memorial Entrance" on 34th Street. Windows along 34th Street, Broadway and Seventh Avenue that have been covered up for years will be reopened. All but one of the store's 43 wooden escalators will be preserved.

"This is a smart move at the right time," Faith Consolo, chairman of retail leasing and marketing at Prudential Douglas Elliman, told The Associated Press. "They're going to up the image. They want to be Harrods of the U.S."

FINANCIALS:     [NYSE:M]

Discussion Questions:

Discussion Questions: What do you think of the investment Macy's is making to its Herald Square flagship store? Will this help Macy's brand and revenue beyond the New York City location?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How would you rate the investment Macy's is making in its Herald Square store?

Comments:

Long overdue. Now what about investing in the employees?

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Bob Phibbs, President/CEO, The Retail Doctor

As the old song goes, "Remember me to Herald Square." When you are a leading retailer you always want to look your very best to your customers, to your employees, to your suppliers and to the world ... particularly in your flagship store. That conveys that you're on top of your game, that you are a successful contemporary retail leader, and that oozes confidence throughout the chain and the marketplace.

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Gene Hoffman, President/CEO, Corporate Strategies International

I agree with Ms. Consolo. Smart move. Every company needs a flagship -- whether it be a flagship product or a flagship store. It sets the standard.

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Paula Rosenblum, Managing Partner, RSR Research

There is now a Macy's in almost every major city in the U.S., so it runs the risk of losing some cachet as the most famous New York-based department store in America. It's a smart idea to refresh its flagship store in Manhattan, not only because of the enormous volume driven by the Herald Square store to begin with, but also because of the "halo effect" on the rest of the company.

Macy's can also learn from its successes in the remodel in order to roll out similar ideas to its other flagships around the country. The Union Square store in San Francisco, the State Street store in Chicago and others can use more razzle-dazzle along with some rethinking of the department store experience. Macy's certainly has one eye on Nordstrom and another eye on JCPenney's new management team as it develops innovative new strategies.

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Dick Seesel, Principal, Retailing In Focus LLC

It's not nearly enough of a capital budget to correct all of the deferred maintenance this store desperately needs. Yes, an investment in replacing so many surly employees would be welcomed as well.

'weo'

Of course, this long overdue and much needed makeover will help the Macy's brand -- both at its flagship and around the country. The industry continues to consolidate; most would agree that Macy's has emerged as one of the big winners. There is much work to be done in upgrading their culture and customer service, but they have already made strides in their designer/celebrity partnerships, assortment, merchandising, and technology capabilities. The flagship store is an iconic destination in American culture, and surely this remodel will be use to herald (no pun intended) in a new era in Macy's history.

Mark Baum, SVP & CCO, Food Marketing Institute

It needs an upgrade to create a buzz, as Macy's is a huge brand name in shoppers' minds. It should transfer to better sales if the remodeling is done right. I think Macy's is a fantastic retailer, and will be around for the long haul.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Right now, the store is a dump. But with the foot traffic it endures, anything but concrete, steel and marble would get terribly tattered. Herald Square ought to be Mecca for any shopper. It is the premier experiential icon of the brand, or at least it should be. Plus, it ought to become more of a laboratory for learning.

Like the parade, Herald Square is an expense that can be amortized across the breadth of the chain as a national media expense.

'IMRetail'

The flagship was to be a prototype for most of the chain, yet unique in various ways because of its flagship status. Macy's is due for an across-the-board upgrade at the store level and this reno is the precursor to better things for all the other locations.

Doron Levy, President, TheMortgageMachine.ca

Ironic that today Syms/Filene's Basement went into bankruptcy for what will probably be the last time. There are many factors here but in the case of Filene's Basement, their flagship was to Downtown Crossing and the city of Boston what Macy's is to NYC...that is, a tourist attraction and a centerpiece for a storied brand. The day FB allowed the flagship to be closed (several years ago) for a new project that never got of the ground was the beginning of the end for them. Investing in 34th street and reclaiming a leadership role in the industry will be a huge plus going forward for Macy's.

Michael Tesler, Founding Partner, Retail Concepts

I was actually in this store (all ten floors of it) last week. And I have to say, it was one of the worst retail experiences I've had in a long time.

The only advice to Macy's would be this ... In the quest for Bigger, don't overlook Better.

Doug Stephens, President, Retail Prophet

While the store is badly in need of updating and remodeling, this effort will not add one dollar of new revenue. Macy's Herald Square is a tourist attraction and that will not change. Macy's as a retailer is working with a business model that is on the way out.

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Gene Detroyer, Professor, Independent

That's nice; and I wish them well; but come on, this isn't a news story, it's a press release (larded with enough superlatives to make Roget envious, and sops to preservationists, construction unions and -- perhaps -- vegans as well.)

Macy's long ago lost any meaningful claim to having a flagship when it expanded to 800+ stores, and the idea that people in Chicago, San Francisco or (even) Maui will hail Herald Square as "their" store is an idea that went out with the Roman Empire: all hail R.H. Caesar!!!...I think not.

'notcom'

Herald Square is the quintessential flagship, not just for Macy's, but for all of retail, really. As such, it makes great sense for Macy's to tackle the massive upgrade. Personally, I find Herald Square un-shoppable and the quease never leaves when jumping on one of those rickety escalators. I do hope that Macy's will use the location as a learning lab and thoughtfully deploy winning strategies to other locations. Otherwise, stark contrasts between the flagship and all the rest won't put Macy's in a favorable light.

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Carol Spieckerman, President, newmarketbuilders

The Herald Square does not have great bones. It was built as medium priced department store. It has none of the grandeur of the Burnham designed Marshall Field's, Wanamaker's or Selfridges. Their aspiration to be Harrods is quite amusing.

'ChitownShop'

This is a good start in the right place for Macy's much needed house cleaning.

'gjarnoldjr'

The Herald Square Macy's is certainly iconic. So are several of the chain's urban center locations in other cities. It's costly to keep those buildings properly maintained and staffed, and in New York at least, the building takes a daily beating.

I am in emotional support of the spruce-up and its symbolism. My hope is that a company of this size can look past what will likely be a poor direct ROI and focus instead the benefits to core shopper equities. My fear is that the downtown department store is evolving from a powerhouse retail environment into a quaint art form.

I admire Terry Lundgren greatly, but I harbor some concern that he may be making a museum out of this landmark store.

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James Tenser, Principal, VSN Strategies

I think it makes sense to maintain Herald Square as the showcase. But it's an interesting juxtaposition, to say the least, to be investing so much in assuring that Herald Square remains unique and distinctive when the rest of the chain settles into a numbing sameness punctuated by poor execution and poor customer service.

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Ted Hurlbut, Principal, Hurlbut & Associates

This is an important step for Macy's, and I find it interesting that they are investing in restaurant space as well. Perhaps department stores are FINALLY realizing that their move away from in-store restaurants was stupid to say the least.

It is also a testimony to the power of the Manhattan market, in the past year Macy's downsized two of its remaining downtown stores (St. Louis, and Pittsburgh).

Kenneth Allan, FORMER Retail HR Exec, Times-Review

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