As Macy's eyes China, some see need for more focus at home

Wed Aug 12, 2015 9:21pm EDT
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By Nandita Bose and Sruthi Ramakrishnan

(Reuters) - Macy's Inc's (M.N: Quote) plan to open a virtual store on Alibaba offers a cheap way into China, but as the latest in a long list of initiatives to spur growth it could spread management thin.

On Wednesday, Macy's said it has formed a joint venture in China with Hong Kong-based Fung Retailing that will start by selling products on Alibaba Group Holdings Ltd's (BABA.N: Quote) Tmall Global marketplace.

The deal comes in the wake of Macy's plans to open off-price stores in the United States that will sell clearance products, start new stores that will sell luxury beauty products, and offer same-day delivery services in more U.S. markets than Amazon (AMZN.O: Quote).

Macy's also is expanding a new loyalty program, localizing store assortments and trying to improve store service.

"No one could accuse Macy's of being a company that stands still," said Neil Saunders, chief executive of retail industry research firm Conlumino. "However, the question remains, Is the company biting off more than it can chew and is it spreading its management and investments too thinly?"

    The China venture takes Macy's focus outside the United States, where the company has almost all its operations. Several analysts said Macy's U.S. strategic initiatives are taking longer than expected to deliver and that pursuing several opportunities simultaneously is hurting the company's ability to execute.

Sterne Agee CRT Research analysts wrote in a note that China and other strategies, including the plans for discount stores and to sell beauty products, muddy a clear strategy and raise the risk profile of the business.

"What was once a clean retail story has become far more complex (and controversial) with negative comps and an assortment of unproven sales drivers," they wrote.   Continued...

A person walks by the sign of a Macy's department store in Pasadena, California May 12, 2015. REUTERS/Mario Anzuoni