Macy’s Execs Talk Growth Strategies – WWD

Just how can Macy’s Inc. forge a path to greater profitability and relevance?

With Macy’s Inc. chairman and chief executive officer Jeff Gennette disclosing he’s retiring next year, there’s been a burst of curiosity and concern about the retailer’s future. But on Thursday, Gennette, along with Adrian Mitchell, chief financial officer and chief operating officer, laid out the roadmap on the future for Macy’s and pinpointing strategies for growth.

Speaking at the Morgan Stanley Retail Roundup, they cited:

  • A revamp of the entire private brand portfolio.
  • Intensifying luxury, specifically at Bloomingdale’s, on the beauty floors at Macy’s, and at Bluemercury.
  • Personalization to drive greater loyalty and conversions and attract a larger younger clientele.
  • Rolling out the Market by Macy’s and Bloomie’s off-mall formats.
  • Building up Macy’s online marketplace; launching Bloomingdale’s online marketplace this fall.

As reported, Gennette, in a surprising announcement Wednesday, said he’s retiring in February 2024, that he will be succeeded by Tony Spring, who has become Macy’s Inc. president, and that a search for Spring’s successor as CEO at Bloomingdale’s started.

“I’ve spent 40 years in this company. It’s been my life’s work. I would not have felt good about turning it over unless I had the right strategies and the right team in place,” Gennette said Thursday. “We believe we can deliver low-single-digit topline growth and a double-digit EBITDA profile in 2024 and beyond.”

The $24.4 billion Macy’s Inc. saw declines last year and expects more this year, and that’s due to macroeconomic pressures, as well as declines online and at Macy’s, though Bloomingdale’s and Bluemercury performed well.

“We see pressures on the consumer continuing in 2023 and it seems like it’s going to continue into 2024,” said CFO Mitchell, who added the COO title this week. “The stimulus is not here. Inflation is still elevated. The jobs market has been holding up. But we’re seeing a lot of different indicators as we look at our proprietary credit card data with credit balances building. There’s pressure on all income tiers. We feel that all of those consumers are going to be quite discerning in all of their purchases. But what we’ve focused on is making sure we have the right stuff for them — the right level of inventory, the right composition of inventory, and really focusing on profitable sales.”

He said Macy’s Inc. entered 2023 with inventory down 3 percent from 2022 and down 18 percent from 2019.

Getting category-specific on where he sees market share opportunities, Gennette first cited electronics and video games sold on Macy’s online marketplace, which launched last September. “We didn’t expect that to be a strong. Those were gigantic sell-throughs for us.”

Gennette also cited private brands. “That has been a total rebuild for us. You don’t start seeing that until August of this year, and then it goes all the way through 2025.”

With Macy’s portfolio of 24 private brand, “We made a commitment that each of them needed to be either refreshed, amplified, retired, and new ones join,” Gennette said. He said based on customer research, “What it came down to was number-one, comfort; number-two, versatility, and number-three, how did it express their unique style.”

Macy’s top private brand, INC, began its overhaul a year and a half ago, and a new private brand will be launched in August, Gennette said.

“Expect that every brand in home accessories and ready-to-wear is going to have a complete revamp over the next two and a half years. Private brand is 16 percent of our business. It’s been as high as 20 percent. There’s nothing but growth ahead.”

Gennette said luxury at Macy’s Inc. is “typified” by Bloomingdale’s, Macy’s beauty business and Bluemercury. Bloomingdale’s just had its record year with record customer satisfaction, and is taking market share from the luxury neighborhood.

“This is a brand game and this is about having an environment that these brands want to coexist with you, because we share customers. They have very developed direct-to-consumer businesses, but it’s kind of a misnomer that they’re all going to go to d-to-c and that the retailer or the wholesale channel is going to be cut out. We have not seen that. We have a big luxury opportunity at Macy’s and beauty. We’ve been basically sizing down the big brand behemoths on our floor that have broader distribution and bringing in these niche luxury players to great success.”

Macy’s chief merchant Nata Dvir and her team have been reshaping the beauty floors of Macy’s over the past six years, and the website in beauty was redesigned.

Jeff Gennette

Jeff Gennette

Courtesy Photo

Gennette said Bluemercury is a “gem” and being built to greater scale. “It’s a great cocktail of skin care, fragrance and color brands.…The secret sauce of Bluemercury is the service,” Gennette said, adding that Bluemercury’s digital business has gotten much better, though there is much more to do “getting a loyalty program that sticks the way that we expect it to.”

With the emerging Macy’s marketplace, “We won’t see a meaningful impact in terms of 2023, but certainly we will see a meaningful impact on growth [in] future years,” Mitchell said. “What I get really excited about is the ability to have a curated marketplace that provides customers with more choice. So, we win with the customer by having the different styles, the different brands, all these different offerings” making Macy’s a more attractive destination, he said.

“What’s also exciting is the margin profile,” Mitchell said, noting that with the marketplace business model, there’s more choice with less risk with slower-moving items. “Not having the inventory liability to be able to extend it to these additional brands or additional opportunities is really exciting for us. When we think about where we are today, we’ve been introducing video games. We’ve been introducing electronics. We’ve been extending our kids’ apparel with new brands and new styles, and we’re seeing the customer respond very favorably.”

He said Macy’s marketplace ended 2022 with 500 brands and the goal is to end 2023 with an incremental 2,000 brands.

So far in Macy’s Inc. off-mall strategy, there are two Bloomie’s and eight Market by Macy’s currently operating. A third Bloomie’s will open soon.

Mitchell said these smaller off-mall retail boxes, generally around 30,000 to 40,000 square feet, offer “speed of checkout, availability of colleagues and quality of shopping experience. All the metrics are significantly better,” compared to Macy’s department stores, often in the 180,000- to 200,000-square-foot range.

Off-mall represents “a huge opportunity for us,” Mitchell said. “We’ve figured out a lot so far. We figured out the format. We figured out the size. We figured out the layout. What we’re really focused on right now is stitching together the different elements of the operation to be much more localized in the assortment.”

Macy’s Execs Talk Growth Strategies – WWD

Macy’s in San Francisco.

Adriana Lee/ Courtesy

Gennette addressed the state of the Macy’s department stores, indicating, “There’s just a lot of opportunity to really continue to elevate the experience in those big boxes. And there’s a material number of big boxes that are still quite relevant for us.”

Macy’s operates 441 department stores and since 2019 has closed 80, leading to significant reductions in costs and headcount, though other areas have seen personnel reductions as well. Gennette said Macy’s coming out of 2022, had about 30,000 less colleagues than in 2020, representing about a 27 percent reduction in headcount.

Macy’s has installed Retail Next technology in stores “to really understand traffic patterns,” Gennette said, such as when customers are coming in, how the flow of traffic plays out, and determining the “hot spots” which will help inform on how to deploy staff based on when and where customers are shopping.

Personalization is of particular interest to Mitchell considering as COO he now leads technology, store operations and supply chain teams while continuing with finance and real estate responsibilities. Mitchell said the company has been through several personalization tests this year.

“We’re seeing really exciting results. The ability to send a relevant communication, whether it’s an offer, a category based on timing and a number of other factors, what we’re seeing is they’re responding much more effectively than the broad-based promotions.…As we go through this year, we’ll continue to test and learn, we hope to scale it [personalization] next year. That’s going to be another major contributor to our growth.

“Number-one is really understanding where can we get a broader base of customers across all demographics and all geographies. We want younger customers, but we also want to serve our older customers as well. And we think that personalization capabilities, not just in terms of how we communicate, but with the style choices in fashion and as we’re expanding across multiple categories, is going to be critical.”

Gennette said the corporation saw a “real drop off” in pandemic-related categories, namely home, active and casual, starting in the first quarter starting in 2022. “That didn’t abate, but it will abate,” Gennette said. “Fashion is all about cycles.”

As home, active and casual merchandise slowed, occasion and travel-related merchandise including luggage and dresses, picked up and was strong the the fourth quarter. Toys, sold through Macy’s Toys ‘R’ Us shops, was another strong category.

In terms the capital budget, Mitchell underscored preserving cash as the priority, while continuing to issue “a modest but predictable” dividend. Money will also be spent to build Market by Macy’s and Bloomie’s, on data science capabilities, and taking advantage of the $1.4 billion share repurchase program.

Be known by your own web domain (en)

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *