Macy's (M) CEO says European factory safety agreement should go beyond Bangladesh

Terry Lundgren fields questions at annual meeting

CINCINNATI - Macy's Inc. CEO Terry Lundgren said Friday that a Bangladesh factory safety agreement endorsed by European retailers this week has "lots of holes" and will not be signed by Macy's. He also said Macy's customers are not expressing concerns about the issue.

"We think it needs to be beyond Bangladesh," said Lundgren, in a session with reporters at Macy's annual meeting in downtown Cincinnati. "There are many other issues that are at stake here. This has been a tragedy, a terrible situation in Bangladesh and that is getting a tremendous amount of press, rightfully so. There are other less reported incidents that are happening in India, Cambodia, Africa, other places and sources of merchandise. So, we want to make sure if we have an agreement it's a much broader agreement and one that really makes sense for retailers as well as these manufacturers."

Lundgren said the National Retail Federation is working on an agreement that would cover North American retailers. He declined to describe the elements of the potential agreement.

Retailers are being pressured to address basic safety concerns in Bangladesh after a building collapse in Dakha claimed more than 1,100 lives. As WCPO Digital reported May 3, the Worker Rights Consortium called Macy's "a significant player in Bangladesh" and has called for the company to sign the binding agreement.

More than two dozen retailers, including Sweden's H&M and Inditex of Spain, have signed the accord, which calls for retailers to contribute up to $500,000 per year for building improvements and set up a system of regular inspections.

U.S. companies, including Walmart and the Gap, have refused to sign the agreement, some citing concerns over being exposed to increased liability in the U.S. court system.

Lundgren said less than 5 percent of Macy's private-brand products come from Bangladesh, but the company is reviewing its safety programs and working with other retailers to address safety concerns. He also said the Dakha disaster has led to at least one rule change for Macy's suppliers.

"We're no longer going to allow manufacturers to have multiple production facilities under one roof," he said. "We can't inspect the other parts of the building if they aren't contracted with us. We want to make sure we can inspect the entire facility to make sure we are comfortable that they are executing at the standards that we would insist on."

Asked whether Macy's customers are asking more questions about where their merchandise comes from, Lundgren replied, "Not at all. I was in multiple stores last week and two weeks before that with my executive team and none of that feedback came to us at all."

Lundgren Discusses Trends

Lundgren broke some news in his speech to shareholders, announcing that Bloomingdale's will open its 38th store in Honolulu. In comments to reporters, he said Bloomingdale's does best in cities with high concentrations of wealth and tourism. He added that Cincinnati is not being considered.

Lundgren offered his insight on the use of technology to make the shopping experience better for customers and maximize the efficiency of Macy's inventory, calling it "a merchandiser's dream."

"I love the idea of fulfilling from our stores," he said. "That means I don't have to build a warehouse that nobody (uses) except for our employees. I've got 800 warehouses. They're called stores. To maximize that inventory, wherever it might be, and pulling the merchandise that's not selling in one store and shipping it to a customer who's interested in it in another, I mean that to me is great."

On the demographic group known as "millennials," customers age 13 to 30, Lundgren said Macy's has been "remiss on the product side of the equation" but it is catching up quickly, with 13 new Millennial brands to be launched by the end of 2013.

"They're the largest group in America in just pure size and they will soon be the largest-spending group in America," he said. "The opportunity's clear and it's going to get bigger."

One question Lundgren wouldn't answer: Who would replace him if he left Macy's today.

"I'm not leaving today," he said. "I really love what I do. So, please don't rush me out of here."

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