Saks, Macy’s Discounts Spark Vendor Spat After Holiday Slump

Saks, Macy’s Discounts Spark Vendor Spat After Holiday Slump
By Cotten Timberlake

Macy's Discount Coupon

Dec. 30 (Bloomberg) -- Clothing makers, balking at the deep holiday discounts offered by retailers such as Macy’s Inc., may force department stores to eat more of the markdowns.

Liz Claiborne Inc., HMS Productions Inc. and a raft of apparel companies plan to push back at the retailers who have slashed some prices by 70 percent amid what’s shaping up as the worst holiday shopping season in four decades.

“We’re asking department stores for concessions,” said Lou Breuning, president of New York-based HMS, which sells Spence blouses at Dillard’s Inc. and Cable & Gauge knits through Macy’s. “I don’t want to take the stores’ margin from A to Z but certainly from B to C.”

Higher-end department stores such as Nordstrom Inc. and Macy’s might capitulate to a maintained profit margin of 35 percent in meetings next month, down from the common practice of vendors guaranteeing 40 percent, said Liz Dunn, a retail analyst with Thomas Weisel Partners LLC in New York. More moderately priced chains, like J.C. Penney Co. and Kohl’s Corp., might agree to 30 percent, down from an estimated 35 percent, she said.

If vendors succeed, they could recoup $1.2 billion from Macy’s, Penney, Kohl’s, Nordstrom, Dillard’s and Saks Inc. alone, based on analysts’ average estimated fourth-quarter sales of $24.2 billion for those six chains.

Sharing Discounts

Apparel manufacturers and department stores will meet before the retail fiscal year ends on Jan. 31 to determine how to split discount costs. Vendors, as is customary, pledged six to nine months ago to compensate retailers for price cuts needed to sell their goods with so-called markdown dollars.

Department-store owners typically set discounts with input from their suppliers and in previous years have had leverage in passing on markdown costs. This time, the retailers may be willing to shoulder more of the burden to help keep vendors solvent, said Michael Appel, a managing director at Quest Turnaround Advisors LLC, a Purchase, New York-based firm that provides crisis management services to retailers.

“Their results are going to be so bad anyway, it’s not going to make much difference,” said Appel, who sits on the board of women’s clothing chain Charming Shoppes Inc.

Brands owned by Polo Ralph Lauren Corp. and Estee Lauder Cos., as well as other vendors in exclusive deals with chains, will carry more weight in negotiations because the retailers depend on them more, he said.

Shrinking Margins

During November and December, sales at U.S. stores open at least 12 months probably declined as much as 2 percent, the International Council of Shopping Centers predicted Dec. 23. That would be largest drop since at least 1969, when the New York-based trade group started tracking data.

Retailers had gained sway over vendors through consolidation, notably after Macy’s bought May Department Stores Co. in 2005, creating a chain of more than 800 locations. Apparel makers’ earnings before interest and taxes shrank from a peak of 11.5 percent of sales in 2006 to 10.3 percent this year and could narrow to 9.5 percent in 2009, according to J.P. Morgan Securities Inc. analyst Evren Dogan Kopelman.

Meanwhile, Macy’s gross margin -- earnings left after subtracting the cost of goods sold -- widened to 39.5 percent in the third quarter from 39.3 percent the year earlier. Liz Claiborne’s gross margin for sales to department stores shrank in the third quarter. The clothier wouldn’t say by how much.

Department stores have gone beyond “what the markdown rate ought to be,” Liz Claiborne Chief Executive Officer Bill McComb said on a Nov. 11 conference call. “There’s no way that every vendor is going to be paying 100 percent of their liabilities here.”

Macy’s, Saks

Macy’s is New York-based Liz Claiborne’s biggest wholesale customer, accounting for 11 percent, or about $400 million, of its total 2007 sales. Liz Claiborne’s allowance for discounts that year was $74 million. Liz Claiborne spokeswoman Dana Stambaugh said the company had no comment for this story.

Saks put new fall fashions on sale in September at 40 percent off, McComb said in November. Nordstrom and Neiman Marcus Group Inc. offered what he called “extraordinary” markdowns. This month, Macy’s is advertising discounts of 20 percent to 65 percent. Representatives of New York-based Saks and of Macy’s, based in Cincinnati, declined to comment.

“The vendors have been absorbing the majority of the impact, and we’re at the point that they are really hurting,” Thomas Weisel’s Dunn said.

The Standard & Poor’s Supercomposite Apparel and Accessories Index dropped 44 percent this year before today. New York-based Liz Claiborne is the biggest decliner in the group of 19 companies, having lost 89 percent of its market value in 2008.

‘Good Partnerships’

“Both sides will be trying to come to the right point of view here,” Macy’s Chief Financial Officer Karen Hoguet said in a Nov. 12 conference call. “We believe passionately in maintaining good partnerships and we’ll do that. But part of that is having us help each other out.”

In October, Jones Apparel Group Inc. Chief Financial Officer John McClain blamed the “highly promotional retail environment” for an erosion in adjusted third-quarter operating margin. Operating income as a percentage of sales at the New York-based maker of Anne Klein clothes and Nine West shoes narrowed to 6.1 percent from 8.5 percent last year, the company reported.

J.P. Morgan estimated that earnings before interest and taxes at Jones Apparel could shrink to 4.4 percent this year and 3.8 percent in 2009. At Jones Apparel, discount allowances were $90 million last year. The company had no comment for this story.

“The retailers call it a partnership,” Quest Turnaround’s Appel said. “The vendors see it more as a one-way street.”

Dressing-Area Exit Gave Mall Shooting Suspects a Way Out

Dressing-Area Exit Gave Mall Shooting Suspects a Way Out

By Dan Morse
Washington Post Staff Writer
Sunday, December 28, 2008; C04

Two suspects who led Montgomery County police on a chase through a Macy's store in Wheaton on Tuesday escaped through an emergency exit in a dressing room area, police said yesterday.

Detectives continued to look for the duo and at least two others who might be involved in what police are calling a gang-related shooting in a parking lot outside the store.

The detectives are studying surveillance videos. One shows three males and a female -- all believed to be affiliated with the same gang -- following another group across the parking lot at the Westfield Wheaton Shopping Centre. Two of the suspects fired shots at the other group. One member of the rival group was wounded. Two female bystanders were injured slightly by flying glass from a nearby automobile.

Another video shows three males and a female entering the department store, walking past racks of clothes and a couple of people who seem at ease.

One of the suspects appears to be holding a white foam food container. Another sips a bottled drink. Three officers enter the store, clearly in pursuit.

Another video, taken near a dressing room, shows two men running into the dressing room. An officer in pursuit can be seen approaching the dressing room but stopping short.

Lt. Paul Starks, a police spokesman, said the officers showed proper restraint, given the blind corner they faced and the presence of armed suspects and innocent bystanders.

"We're not trained to rush into places under those circumstances," Starks said.

The duo in the dressing room used an emergency exit door and fired one round -- an apparent accidental discharge -- in the process, police said. Officers found two guns in the dressing area, one of which was determined to be stolen.

Two or three hours after the chase, police arrested a 19-year-old man carrying a stolen gun at the store. Police no longer believe he was linked to the parking lot shooting.

Police provided the following descriptions of four people who they say were in the group in the parking lot:

· A black male, 5-foot-10 to 6 feet tall, weighing 160 pounds with short black hair. He appeared to be 18 to 22 years old and was wearing a yellow hooded jacket with black sides, tan cargo pants and white tennis shoes. Police said he might have been one of the shooters.

· A black male, 6 feet to 6-foot-1, wearing a black jacket and jeans with stonewashed fronts. Police said he also might have been a shooter.

· A black male, 5-foot-6 to 5-foot-8, weighing 160 to 170 pounds, who appeared to be in his early 20s. He was wearing a green jacket and a black knit cap with a white circle near the top of the cap.

· A black female with a light complexion, 5-foot-4 to 5-foot-6, weighing 120 pounds, who appeared to be 16 to 20 years old. She was wearing a white, gray and black medium-length North Face jacket with jeans and black shoes.

Police ask that anyone with information about the incident call 240-773-5530.

Macy's closing nine stores

Macy's closing nine stores
December 28, 2007

On Friday, Macy’s announced it will be closing nine underperforming stores in Indiana, Louisiana, Ohio, Oklahoma, Texas and Utah. Chairman, President and Chief Executive Terry J. Lundgren said the chain is closing locations where growth opportunities did not seem to exist.

Some of the 899 staffers who worked at the stores are going to be offered positions in nearby locations. Others will receive severance pay and outplacement assistance.