Analyst: New Macy's Missing Its Mark

While most observers have been guardedly optimistic about how well Federated Department Stores is faring in converting the former May Department Stores to Macy's, one vote is in, and it's not positive: Bank of America lowered its rating from "buy" to "neutral" this week.

A report written by analyst Dana Cohen cited short-term marketing concerns as part of the problem, and noted that the company's "marketing message is not driving traffic as expected."

While Federated does not break out same-store sales analysis for May Stores--which it converted to Macy's in September--Bank of America estimates that at the "new" Macy's, "comparable store sales have been running negative all year long, and have actually deteriorated over the last few months since the doors were converted to Macy's. We estimate that November comps were down 11 percent."

While still bullish about Federated's other stores, and optimistic that it may eventually improve the former May holdings, the report also cites the shock of the nameplate change, big changes in assortments, and problems with store environments and service levels.

A sharp reduction in the promotional calendar at former May stores, with fewer coupons and less dramatic markdowns, was also a cited factor. "It may take time to find the right voice with the customer," Cohen wrote, in terms of balancing branding and promotional marketing. "Marketing needs time to gain traction."

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