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Macy's CEO says store on solid ground

| Saturday, May 21, 2011

CINCINNATI — Macy's CEO said on 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 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 rose 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."

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

Some Macy's vendors and suppliers are adding quality to their products with new details such as enhanced buttons or workmanship to give consumers with more reason for increases when prices do go up, Lundgren said. He highlighted vendors like Tommy Hilfiger, Ralph Lauren and Calvin Klein.

"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 price of 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.

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