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As Terry J. Lundgren, Macy’s CEO since 2003 and Chairman since 2004, readies himself to leave the company, he is hopeful that the venerable retailer can bounce back and show its resiliency like it so often has exhibited in the past.
Macy’s wants to be the premier omnichannel retailer focused on the customer experience and increased customer engagement. Jeff Gennette will succeed Lundgren as CEO in the first quarter of 2017.
During his time at Macy’s and his six years as CEO of Neiman Marcus before that, Lundgren has witnessed a series of setbacks that, he said during the company’s Feb. 21 fourth-quarter earnings call, seems to happen every five to seven years in the retail industry.
Lundgren said that 9/11 “was a tremendous hit to retail and it was written that consumer shopping habits changed forever and department stores were no longer relevant. Well, a few years after that, 2005, we were able to acquire The May Company and become the first national fashion department store in the United States and became the largest seller of most of the most-wanted brands in the country.”
And then 2008 came and “we all know what happened to consumer spending at that time,” Lundgren added. “We were hit very hard, but we made the needed adjustments, created a winning strategy, pulled together an incredibly talented team, and bounced back with consecutive winning streaks for five years in a row ending with growth, a period of five years of growing by $5 billion and a 14% EBITDA with 38 fewer stores than we began that period with. So, we did what we had to do. And now here we are seven years later and after 2008 and 2009 with another setback. And once again, we’re faced with challenges.”
Amid the concerns internally, Lundgren is confident because “so many of the people that are on our team have seen this movie, or some version of it, in the past and get excited about taking on that challenge. So, we anticipate that the challenging environment that we experienced in 2016 will continue, but we’re not standing still. We made a lot of strategic decisions this past year that are going to set us up well in 2017 and we're going to continue to fine tune our strategy and vision forward to get ourselves in a position to win in the future.”
Lundgren believes Gennette is the right person to lead Macy’s comeback.
“Since his appointment as President of Macy’s three years ago, he’s taken on increasing responsibility for operating this company and done a great job,” Lundgren said of Gennette. “With Jeff as CEO, we have someone with deep knowledge of our business coupled with the vision and determination to reinvent Macy’s as we've done every other time when I've been told that our industry was no longer relevant.”
One of the things Gennette plans to do is make Macy’s a “significantly different retailer” in the future in the way the company operates and its approach to the marketplace. Given the fact that customer shopping preferences and patterns are evolving rapidly, Macy’s officials are doing more work than ever on data analytics to understand this evolution and ensure they are well positioned to serve customer needs in both the short- and long-term.”
Lundgren admitted that 2016 was not “the year we expected, nor hoped for, and we’re not happy at all with the 2.9% decline in comp store sales.”
But, Macy’s took significant strides in various areas.
“We completed a major restructuring of the entire organization and concluded a significant reduction in layers of management in the central organization and improvements in the field of store management structures,” Lundgren said. “These were big changes for us. I'm happy to see that our organization is settling in and learning to work with leaner teams and faster processes. We took bold steps towards streamlining of our portfolio with the closure of 66 stores. We plan to close approximately another 34 additional stores over the next few years. This will give us a healthy physical portfolio, one that complements our growing digital business.”
What’s more, Macy’s officials are confident about their digital investments, “which have created the best, or certainly one of the best, omnichannel experiences in the retail industry,” Lundgren noted. “But, we acknowledge that more experimentation with in-store technology and creative solutions for customers who are shopping in our physical stores is an opportunity for focused capital investments in 2017.”
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