Pondering the Future of Macy’s Amid Leadership Changes
Can Macy’s be truly modernized for a better future?
As industry pundits and experienced retailers see it, Tony Spring, the new Macy’s Inc. president who is set to succeed Jeff Gennette in February 2024 as chief executive officer, has a formidable task ahead — getting it together at the Macy’s brand.
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Under Gennette, Macy’s has already undergone major change. It’s become more agile post-pandemic; data-driven; less glutted by inventory; prepared to chase fashion trends, and has streamlined management and shed about 80 weak stores, restoring its relevancy. All good.
But the standards at many stores must be raised. The Market by Macy’s specialty stores and online marketplace formats, as well as the Backstage off-price offshoot, need to grow and evolve to become bigger contributors to the enterprise. And recent negative sales and profit trends must be reversed.
“Macy’s is in kind of growth desert right now. That’s the big challenge,” said Craig Johnson, president of Customer Growth Partners. “The business has been slowly losing its top-line momentum.”
“Backstage is helping somewhat, but it’s a bloop double, not a home run. Macy’s right now needs a new growth engine. The problem for the most part is Macy’s has a fleet of stores built for yesterday’s retail wars, for enclosed malls with multi-departments. The one-stop shopping, everything-under-one-roof tactic has been overcome by digital. The Macy’s fleet is sized, structured and designed for the ’70s and ’80s. The other newer channels they have embarked on seem more relevant. I believe the Market by Macy’s concept is where the future is and that needs to be boosted. The concept is good. Macy’s is really fine-tuning it to get the formula right,” he added.
“Changing the guard in any business provides an opportunity for new thinking and for injecting more enthusiasm into management. These things are vital for success and, in truth, Macy’s needs them more than most,” Neil Saunders, managing director of GlobalData, wrote in a report Wednesday on the Macy’s transition.
“While Macy’s has no shortage of strategies and is great at talking a good game, it consistently fails to execute well. As a consequence, it has not arrested the decline in relevance and market share,” Saunders commented.
Not everybody would agree.
“We’ve been very impressed at how they’ve tried to be nimble, how they’ve tried to also be local as far as paying attention to the nuances of the communities they’re in and how they buy for a particular area. They have been doing that for a long time,” observed Steven Plenge, CEO of Pacific Retail Capital Partners, which owns or manages a total of 25 enclosed malls and open-air shopping centers across the U.S., housing about 20 Macy’s department stores.
“We think they’ve done a good job of staying up with the apparel trends, and they have been great at managing their expenses,” Plenge added.
“Department stores would make it extremely difficult to get anything done as far as redevelopment. But Macy’s has been a good partner, and very practical and cooperative on our redevelopments. They’re critical components of our projects.”
“Tony Spring will decide what his priorities are, but I give Jeff a lot of credit for having Tony getting involved at Macy’s corporate level and at Bluemercury and giving him opportunities while he was running Bloomingdale’s. It’s the kind of opportunities that other retail CEOs might not have extended,” said a former top retail executive.
“My understanding is that Tony has been attending board meetings and involved tangentially. Tony comes into Macy’s with a good feel for it, but until he’s there for awhile, we don’t know for sure what the agenda, the priorities, will be. He will bring a different dimension to the business. But keep in mind that Macy’s online business was down last quarter and the store business is off. Tony does have his work cut out for him. He’s got to change the culture. It’s how the people operate. It’s how Macy’s treats the market. It’s the lack of service in many of the stores. The presentation is inconsistent. I mean the standards for Macy’s are below some of its competitors, particularly Dillard’s,” the executive added.
The $24.4 billion Macy’s Inc. projects further sales and profit declines this year, which means that in 2024, after Spring takes the helm, the picture should start appearing brighter. Comparisons between 2023 and 2024 get easier and the topline could swing into the plus column.
Bloomingdale’s, unlike Macy’s, has been on a good trajectory. Within the department store sector, Bloomingdale’s has been getting the highest reviews from consumers, primarily for quality luxury and contemporary offerings, crisp displays and an energized shopping experience abetted by associations with pop culture. The business seems destined for increased support from corporate for expansion, particularly since Spring spent his entire career at Bloomingdale’s, the last nine years as CEO and chairman. He knows the opportunities.
With only 34 stores and 20 outlets there’s room for additional Bloomingdale’s in Texas, Arizona and the Northwest, where there are no Bloomingdale’s, and markets that already have Bloomingdale’s could be filled in with Bloomies units. Currently, two Bloomies are open and a third is opening soon. There is also opportunities overseas. “Bloomingdale’s will have a different voice. It has big opportunities to grow, to expand,” said the retail source.
The path for Bluemercury also looks bright, considering Spring has been involved in its turnaround while simultaneously CEO at Bloomingdale’s. The fragrance sector has generally been strong.
On Wednesday morning, Macy’s Inc. surprised the industry by revealing that Gennette, the 61-year-old chairman and CEO and a 40-year veteran of the company, will retire in February, and that Spring, the 58-year-old chairman and CEO of Bloomingdale’s, became Macy’s Inc.’s president and will become the group’s CEO upon Gennette’s retirement next year. Spring also joined the Macy’s Inc. board.
A search is underway for the next CEO of Bloomingdale’s.
As Macy’s president, Spring will be responsible for the corporation’s digital, customer, merchandising and brand teams, while overseeing the Bloomingdale’s and Bluemercury divisions. The role of president has been vacant since Hal Lawton left in December 2019 to become president and CEO of Tractor Supply.
In another key change, Macy’s chief financial officer Adrian Mitchell is taking on the additional role of chief operating officer. As CFO and chief operating officer, Mitchell will lead the store operations, technology and supply chain teams while continuing with his finance and real estate responsibilities.
At Bloomingdale’s last week, Denise Magid was promoted to chief merchant. There has been speculation that she is being groomed for a bigger role within Macy’s Inc. She could be a future Bloomingdale’s CEO though that would be years off, as Gennette told WWD that she is not in the running to be the very next Bloomingdale’s CEO.
A seasoned merchant, Magid was most recently executive vice president and general merchandise manager for ready-to-wear, center core, concessions and Bloomingdale’s outlets. Magid made retail history last week by becoming the first to hold the title of chief merchant at the 150-year-old Bloomingdale’s. Previous CEOs, including Michael Gould and the late Marvin Traub, were de facto chief merchants, even if they didn’t have that title, because the general merchandise managers reported directly to them.
Regarding Bloomingdale’s next CEO, sources said the search would likely focus on a strong operations-type executive, who would have responsibility for such areas as stores, finance, marketing and human relations, while Magid reports to the CEO, and the general merchandisers report to her.
The Macy’s Inc. change in command is surprising considering Gennette is a few years younger than when most CEOs opt for retirement. While Macy’s most recent financial results haven’t been stellar, Gennette, widely respected for his leadership qualities and showmanship, is credited with successfully navigating Macy’s through a profusion of challenges including the pandemic, inflation, recession worries, the rise of Amazon and fast-moving shifts in consumer shopping behaviors, as well as pressure at times from activist investors.
Significantly, Gennette and his team deserve credit for something that’s hard to measure — changing industry perceptions of Macy’s Inc. for the better, that it’s still relevant. That is a big accomplishment considering all the company has been through, and the cacophony from pundits preaching the death of the department store.
“It seems early for Jeff to be leaving, since he’s only 62, and Terry Lundgren [former Macy’s Inc. CEO] resigned at 65,” said Johnson, of Customer Growth Partners.
“I never like to see a real long difference between when someone is named and the actual start date. This is an 11-month transition so at some point there could be some ambiguity about who is really in charge. I like to see shorter transitions. The one good thing is that there is a clear date for the handoff. That’s a distinction from Levi Strauss, where Michelle Gass will be rising to CEO but there is no specific date for that.”
Still, the general assumption is that the transition should be fine. Gennette and Spring are said to have a good working relationship. On Wednesday, Gennette characterized Spring as “a great innovator, brand builder, a great developer of talent and with storytelling skills and deep partnerships in the vendor community.”
Spring’s ascension is hardly surprising. Aside from leading Bloomingdale’s and getting good results there, he’s been active across the Macy’s portfolio as a member of the Macy’s executive leadership team, and been involved with the repositioning of the Bluemercury division and transforming Macy’s.
Johnson and others suggested that food and beverage hasn’t played a big enough role in Macy’s historically. “If you go to London and visit Harrods and Selfridges, there is a big food component typically on the first floor for eat in or take out. It’s a great traffic builder, an excuse to go into the store and stay longer,” said Johnson. “People do need to eat every day. They don’t need to buy a bathing suit every day.”
Johnson did credit Gennette with closing about 80 stores, though he and other retail analysts and observers feel more closings will come.
Johnson also said, “Macy’s has a lot of positive brand equity, and has a decent job attracting younger families and new Americans, but clearly you have to understand we are in a new era of retail. Make the fleet smaller. It’s pretty much the same fleet of a generation ago.”
Saunders, while critical of Macy’s, wrote that under Gennette’s leadership there have been positives. “The nimble response to the pandemic, the enhancement of the online proposition, the willingness to take tough decisions on store closures, and the partnership with Toys ‘R’ Us are all to his credit. So too is the fact that Macy’s is financially stable while some other department stores are struggling. Our balanced view is that this adds up to a legacy of stabilizing the ship but falls quite a way short of advancing it.
“The hope is that the next CEO, Tony Spring — along with some of his new C-suite colleagues — will be more of an agent of change and will fix some of the long-standing issues, especially around the in-store experience,” added Saunders. “Mr. Spring’s background in merchandising and the fact he has run Bloomingdale’s, where brand image is extremely important, bodes well. However, our slight concern is that, as when Mr. Gennette became CEO, this is an internal appointment which means that the traditional Macy’s way of doing things may prevail.
“Thanks to Mr. Gennette, Macy’s isn’t dead or even circling the drain. However, it is still on a perilous glide path with weak long-term prospects. It is the job of the new CEO to change this trajectory and not to simply stick to the current course.”
Veteran retail analyst and blogger Walter Loeb said, “One of the challenges Tony will have will be getting to know the Macy’s people. Obviously, he knows everybody at Bloomingdale’s, and he does know some of the Macy’s people, but he will need to get to know more of the team. Macy’s certainly needs a lot of work. Tony needs to be living in a store for some time, and then decide on what kinds of changes he sees necessary.
“Nothing right away will happen, but I am expecting major changes, a revamp starting with the look of the stores, maybe a new spirit getting injected,” Loeb said. “Do you have to carry everything or would you want it to have more of a contemporary slant appealing to many more younger people? Is that shoe department at the Herald Square flagship really working? Tony revamped the shoe department at Bloomingdale’s, he might as well take a look at the shoe department, and make it more of a major attraction.
“Macy’s, back in its history, did have a big food department on the main floor. Perhaps something like that could be back. There is a lot to gain by having more food and beverage. There are a lot of things that need to be done, that have to be modernized,” said Loeb.
Spring joined Bloomingdale’s in 1987 as an executive trainee in the White Plains, New York store, and rose through the ranks until becoming chairman and CEO in 2014.
“This is a fantastic promotion for Tony,” observed Michael Gould, the former CEO of Bloomingdale’s. In 1991, very soon after Gould began the role, “Tony was the very first person I promoted at Bloomingdale’s. It was in October 1991. I promoted him to merchandise manager. Over the next 23-plus years, I was with him all the way,” said Gould, who was succeeded by Spring in 2013. “Tony is very thoughtful and strategic. He comes across at times as very understated, but underneath the hood is a burning passion and a lot of intellect.”
Gennette’s passion for retailing was born during high school when he sold mopeds on commission at Moped Motors in El Cajon, a suburb of San Diego. “I really enjoyed it and was quite good at it. I made a lot of money selling on commission. I enjoyed figuring out what the customers needed, looking at the products I had and making that connection.”
In college, he majored in Victorian literature and creative writing, but he still had the retail bug so he joined Macy’s right out of college. “I thought I would stay a couple of years and go to business school.”
He briefly left Macy’s to try specialty retailing with FAO Schwarz, where he opened the flagship in Union Square in San Francisco. “After eight months I realized specialty retail was not right for me, so I came back to Macy’s as the store manager in Santa Rosa [California].”
In different parts of the country he worked as a sales manager, a floor manager, a store manager, assistant buyer, associate buyer, buyer, divisional, general merchandise manager and director of stores. He became chairman of the former Bon Marché and Macy’s West divisions before they were converted to Macy’s, later ascending to Macy’s chief merchant, then president. He became CEO in 2017, and chairman and CEO a year later.
“I am definitely retiring, but I might do something else,” he told WWD. “I don’t know what that is yet. Macy’s has been my life’s work. I have had Macy’s jobs in many parts of the country. I’ve been in many different functions. I couldn’t be prouder…I will have another chapter but I don’t know quite what it will be. I am excited about being able to spend more time with my family,” including his husband, who is retired, and his daughter, who will soon graduate from Parsons School of Design.
Asked why he stayed so long at Macy’s, Gennette gave a quick and simple response. “Amazing mentors — Sue Kronick, Terry Lundgren, Janet Grove, Bob Mettler, Mike Steinberg. These were players that believed in me. They were hugely influential. They always put new opportunities in front of me, and in many cases it was before I thought I was ready for them. It’s been very enriching. This may be a cliché, but the piece that has brought the most satisfaction has been all the talent and working with the teams.”
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