May 29, 2009, 12:00 AM

Macy’s prioritizes the Internet as it slows plans for store growth

Macy’s Inc. may still be best known for its stores, but it may be awhile before additional stores join the chain. For now, the future is online, says CEO Terry Lundgren.

Macy’s Inc. may still be best known for its stores, particularly the famed Macy’s Herald Square along with a dominant presence in many shopping malls, but it may be awhile before additional stores join the chain. For now, the future is online, CEO Terry Lundgren says.

“Over time the new store sites and new mall construction sites are going to take longer to become a reality,” Lundgren said in a first quarter conference call with analysts. “I have been very proud of our investment in technology, in our systems, which have been particularly focused in the last two years on merchandising and marketing initiatives, technology initiatives, and our investment in the dot-com infrastructure.”

Macy’s doesn’t break out specific quarterly web sales. But in the first quarter ended May 2, the web channel grew by 16.2% while total sales declined year over year by 9.4% to $5.2 billion from $5.74 billion and comparable-store sales decreased 9%. Macy’s net loss also widened by 49% to $88 million in Q1 2009 from $59 million in the prior year.

The bright spot

“A bright spot in our business is the Internet,” Lundgren says. “We remain very excited by the possibilities for our direct-to-customer strategy and how it is becoming increasingly integrated with our stores.”

In the past several years, Macy’s has invested heavily in its e-commerce channel and its direct-to-consumer fulfillment capability. In 2007 Macy’s invested $100 million to upgrade e-commerce, order management and warehouse management. The company also opened another web fulfillment center in Arizona.

“The fulfillment facilities over the last two years, the technology attached to those facilities and the web site itself have been an important investment and will continue to be,” Lundgren says.

mark@verticalwebmedia.com

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