Macy’s CEO touts first quarter

CINCINNATI – Macy’s CEO said Friday that there will be winners and losers among retailers going into the fall season amid inflation worries, but he feels the department store chain is in a good position.

CEO, President and Chairman Terry Lundgren gave a glowing report to shareholders at a meeting in Cincinnati, highlighting what he called “an outstanding first quarter.” The Cincinnati-based company reported earnings last week that beat forecasts by 12 cents, with Macy’s reporting net income of $131 million, or 30 cents per share, on rising sales.

Meeting with reporters later, Lundgren said Macy’s broad assortment of products and brands means that plenty of its product categories won’t be affected by inflation.

“We feel very good about where we are at,” he said.

Some clothing retailers have started to pass along higher prices on certain goods as costs rise for commodities such as cotton. Those increases, coming on top of higher prices for food and gasoline, will mean that lower-income shoppers are “going to be stressed,” Lundgren said.

“But our customers are spending with us,” he said. “We are clearly capturing market share, and we are beginning to spread out our performance versus our competitors.”

Macy’s has started to push some higher prices on to consumers – although it has pulled back on some – and Lundgren said there will be no price increases in many parts of the company’s stores.

Some Macy’s vendors and suppliers will increase prices, but some – like Tommy Hilfiger, Ralph Lauren and Calvin Klein – are adding value to their high-cost products for fall delivery. Details such as enhanced buttons or other workmanship provide more of a reason for the increases over the cost of the raw material, Lundgren said.

“If you are just selling simple basic T-shirts, I think that’s a problem,” he said. “I think those guys are going to have a hard time, because there’s no way to hide from a big increase in the actual raw material.”

Lundgren told shareholders that Macy’s strategy of tailoring merchandise to local markets, adding exclusive brands and filling gaps in its assortment – such as in the young, contemporary area – will provide momentum for continued improvement in sales, earnings and cash flows.

But Macy’s believes the key to success is “blurring the line between our stores, the Internet and mobile technology to the point where we surround our customers and can respond to their needs no matter which way they prefer to shop,” Lundgren said.