Macy's CEO vows comeback in meeting with shareholders

Dive Brief:

In March 20 meetings with shareholders and reporters, Macy’s CEO Terry Lundgren acknowledged that the department store retailer is facing significant challenges but said he isn’t concerned about predictions that Amazon would bypass it as the country’s largest apparel seller, promising Macy's would come back as it did in 2001 and after the Great Recession of 2008, the Cincinnati Business Journal reports.
Perhaps referencing Amazon’s questionable retail profits, Lundgren said "It's not important for me to be No. 1 or No. 2. It's important to me to be a profitable retailer,” according to the publication.
Lundgren also emphasized initiatives like Macy’s off-price Backstage stores, which he said would total 22 locations nationwide this year; Last Act apparel clearance spaces, which have been rolled out to all stores; and beauty and spa services retailer Bluemercury, which will expand to 115 stores by the end of 2017. Lundgren also promised changes to Macy's jewelry and wedding sales, and an increase in sales in China.

Dive Insight:

Earlier this month Macy’s reported a sales decrease of 7.4%, due mostly to its 41 store closures last year. Same-store sales on an owned plus licensed basis fell 5.6% and on an owned basis dropped 6.1%, the fifth straight quarterly decline. Macy's EPS beat expectations, but the company alarmed Wall Street when it lowered its full fiscal year guidance.

"We view the setbacks of 2015 and early 2016 as a setup for a comeback that we expect to begin in the second half for 2016 and move forward from that point," Lundgren said Friday.

Lundgren noted that younger shoppers are focused on price, rather than value. His emphasis on Backstage and Last Act sales indicated that Macy's is planning on lower price points to move apparel.

That could jeopardize Macy's standing among more upscale brands. Victor Luis, CEO of newly resurgent Coach, for example, last month said that the brand might consider pulling back on heavy discounting through department stores and that it even may consider exiting some department stores, although he didn’t specify which ones.

In addition to the initiatives that he outlined Friday, Lundgren said that Macy's will boost the numbers of full- and part-time customer service associates in stores. Store staff are seen as an integral part of the brick-and-mortar experience, even as e-commerce and digital efforts are growing.

Macy’s already has a good reputation as a place to work, with higher wages and benefits and better working conditions than other retailers. But just ahead of the shareholders meeting, some 5,000 employees at four New York City Macy’s stores voted on Thursday to authorize a strike if a fair contract isn’t negotiated by June 15, according to the Local 1-S of the Retail, Wholesale and Department Store Union.

Among the issues of concern to the union are cuts in retirement benefits and “harmful changes” in scheduling and other work rules, according to a press release.

“The magic of Macy’s will be lost if the company uses this contract negotiation to put so many dedicated employees on the clearance rack,” Local 1-S president Ken Bordieri said in a statement. “When our members are constantly worried about making ends meet and paying for unaffordable healthcare, they won’t be able to deliver the customer service that keeps millions of shoppers coming back every year. We urge the company to meet us at the bargaining table with a fair contract.”