"It's an edited, focused assortment, with higher average retail [prices] and more differentiated brands," she said. "We have had double-digit increases in our average sales the last three years in a row. Three years ago, we did zero contemporary business. Now it's 20 percent of our total."

The private Context contemporary line could play a bigger role, as well as the Kate Hill bridge sportswear line.

While the outlook for Lord & Taylor certainly seems brighter than a few seasons ago, it's still a fight to secure the future. Nordstrom and Bloomingdale's have been expanding and performing well, and Saks Fifth Avenue is gaining momentum in its turnaround efforts. Executives from Lord & Taylor and other stores say their businesses have been able to capitalize off Federated's conversion of May doors to Macy's, and the many shoppers who have been turned off by the strategy. Macy's sales have been weak this year.

Meanwhile, there's been a talent buildup at Lord & Taylor, ranging from a new chief operating officer and second-in-command Mark Weikel, to advertising guru David Lipman, to create a branding campaign, with new advertising, shopping bags and boxes, and a new credit card. The rebranding will launch in September, right after Labor Day. Lord & Taylor has also hired Y&R's Brand Buzz; Randall Ridless, a designer of store interiors, and Mancini Duffy, an architectural and design firm, to handle assignments ranging from developing a fall-holiday branding campaign to spotlighting ongoing merchandise changes. The new merchandise direction will be evident at the 650,000-square-foot flagship in Manhattan, which generates only about $140 million in annual volume, as well as the suburban stores, which have been strong performers for the chain for years.

In addition, a customer relationship management system went live last week. It's a database management system that helps the store target market.

Asked if the remerchandising runs the risk of putting off long-time, loyal customers, Elfers replied: "I wouldn't call it riskier. Lord & Taylor is continuing to be relevant to the next generation, reaching down [in age] and keeping the core customer. Our business has been good, and the vendor community has been very supportive on the repositioning."