Drawing on a 40-year track record as a Macy’s employee that began as an intern in 1983 and saw him in the role of President and CEO for the past six years, Jeff Gennette has experienced more than its share of ups and downs at the top of one of the oldest and best-known brands in retail.
And yet, by some accounts, the past three years of unprecedented transformation and top-down change have left Gennette, and the company, in an entirely new place.
“I would say the headline here is we’re a more modern department store,” Gennette told analysts and reporters listening to the company. third quarter earnings call Thursday (November 17). “It’s a different business than we were in March 2020,” he added, before listing five fundamental changes to back up his belief.
Those buckets of transformation, he said, include a stronger, more aligned team, much better financial health, including much less leverage, and “little to no debt over the next five years.” , as well as better inventory control and supply chain management, improved pricing science, and a reinvigorated private label strategy.
The result is a 3.9% drop in sales for the three months ended October 29 and, crucially, no reduction from its earlier forecast for the current quarter, contrary to what rival retailers such as Target and Kohls said this week.
More work to do
Of course, while Macy’s has changed a lot, Gennette is the first to say that while pleased with the progress, the job is not done.
“The concept of being a trusted one-stop-shop is timeless,” he said of Macy’s renewed efforts to attract more labels, brands and people to its 500 national stores. “But that only works if it reflects our client’s preferences and needs.”
At this point, Gennette pointed to the early success of its ongoing store-to-store partnership with Toys R Us as an example of the nimble new Macy’s, calling the initial response to last month’s rollout encouraging and an experience that doesn’t exist. on a national basis everywhere else.
“Overall, the Toys R Us customer is younger and more diverse than the Macy’s customer and we found that 85% of Toys R Us customers cross-shop,” Gennette said, calling the deal of “great example of finding a hole in the market”. and fill it strategically, gain sharing and loyalty and create lasting memories for children and adults.
Likewise, he said the company’s new small-format, off-mall “Marketplace” pilot program was also working well and should be expanded beyond the current eight locations, as the project allows it to offer a medium-to-low risk presenting new options to customers without supporting inventory liabilities, while generating above-trend sales growth, retaining existing customers and attracting new ones through its highly curated merchandise mix.
“It’s encouraging and, like Toys R Us, it further reinforces our one-stop-shop status,” he said.
Luxury and Digital
In keeping with the global resilience that most luxury brands enjoyed during this period of record inflation, Macy’s premium labels also performed better in the current environment than the flagship brand. Indeed, Bloomingdales and Bluemercury reported comparable store sales growth of 5.3% and 14% respectively last quarter.
At the same time, Macy’s noted the outperformance of its physical business, which saw sales fall 1% in the third quarter, compared to the 9% drop in revenue from its recently expanded digital platform, which, according to it is up 35%. from 2019.
“We have transformed our entire organization,” Gennette said, noting that the breadth and diversity of its product line, which is not tied to any value band, category or life stage , was well placed to meet increasingly cost-conscious needs. clients.
“Our position is a strength, especially in today’s environment where the styles our customers are looking for, the categories they are searching for and how much they are spending can differ significantly from season to season,” he said. declared.
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