Macy's Inc. rolling out new licensing deal with Locker Room by Lids

Genesco CEO talks up deal in earnings call

CINCINNATI -- Macy’s Inc. is expanding its roster of exclusive licensing deals with specialty retailers, adding a Locker Room by Lids concept to 200 of its 840 stores by 2014.

The new store departments are being installed by Lids Sports Group, a division of Nashville, Tenn. –based Genesco Inc.

Under the licensing deal, Indianapolis –based Lids will sell hats, apparel and novelty items with logos from professional and college sports teams. Glassware, throws and garden gnomes will be among the merchandise offered to Macy’s customers online and in stores.

Plans call for Locker Room by Lids departments to be installed at 25 Macy’s stores this fall, mostly in towns with NFL teams. Macy's spokesman Jim Sluzewski said no Cincinnati stores will be included in initial 25-store rollout.

“Right now, there are only 40 to 45 Locker Room stores (near the) proposed 200 Macy's locations and so there will be relatively little overlap with our fan-focused retail network,” Genesco CEO Robert Dennis told analysts Aug. 29. “And while there will be Lids (hat stores) within the malls at almost all of the 200 Macy's locations, only about 10 percent of the merchandise in the Macy's licensed department will be hats … which reduces concerns about cannibalization.”

Macy's and Genesco offered no revenue projections for the new relationship. A recent press release said the Lids departments will occupy between 500 and 1,000 square feet per store. Eventually, they’ll be equipped with touch-screen kiosks where fans can order from a broader inventory selection.

Macy’s is among several department store retailers experimenting with licensing deals that result in stores within a store. JCPenney aggressively pursued the strategy last year, but pulled back when sales plummeted.

Macy’s has licensing deals for Starbucks coffee, Sunglass Hut glasses and Finish Line athletic shoes.

The Finish Line deal, announced last October, calls for new Finish Line shoe departments in up to 450 Macy’s stores. Both companies said the arrangement will yield up to $350 million in annual revenue. Finish Line CEO Glenn Lyon told analysts June 28 that 50 Finish Line departments installed at Macy’s so far are performing as expected.

“These shops are going to be more productive per square foot than a Finish Line,” Lyon said. “The traffic generated in these Macy’s stores is mind-boggling to me.”

Retail industry analyst James Tenser said the licensing strategy will become more prevalent in the future as department store retailers adapt to online sales growth by shrinking bricks and mortar stores.

“Macy’s has a wealth of retail space at a time when there’s pressure to reduce the amount of stock on hand,” said Tenser, owner of VSN Strategies in Tuscon, Arizona. “One of the challenges of retail stores is that they tie up a lot of dollars in inventory. It’s money standing still. The goal is to have less inventory on hand and keep money turning faster.”

Tenser said the Locker Room by Lids deal is a way for Macy’s to attract younger male customers, while not losing focus on its key demographics, women and millennials. Tenser thinks Macy’s may target a day spa or some other service provider in future licensing deals, but he doesn’t expect the retailer to stray too far afield from fashion, its bread and butter.

“Macy’s has worked very hard to maintain the meaning and integrity of its brand,” he said. “I would not expect this company to dilute that by getting too wild in its leased department. I think they’ll be careful to bring in the kind of image they want to sustain.”

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