NRF RETAIL CONVERGE — The pandemic last year may have thrown a wrench into Macy's best-laid turnaround plans, but CEO Jeff Gennette appeared undaunted during a video keynote address Thursday at NRF Retail Converge.
"2020 was an unprecedented year," he said. "And I think the headline is that Macy's is a healthier business coming out of the pandemic than we were going into it."
Certainly, the extreme circumstances ushered in by the disease outbreak led many companies, including Macy's, to slash operating costs at a level that might otherwise seem drastic. The retailer last year cut its corporate workforce by nearly 4,000, along with other staff reductions, for example, engendering some $630 million in annual savings — $365 million of that in the last fiscal year alone. "We know that we will be a smaller company for the foreseeable future," Gennette said at the time.
Macy's was also already in the midst of a massive contraction of its footprint before the pandemic hit. Brick and mortar took a back seat during Gennette's talk on Thursday, during which he submitted another headline suggestion.
"The headline here is that we're very accelerated and focused on digital shopping, and as an omnichannel brand, on how we can best accomplish that for our customer," he said, adding that the company reacted swiftly to the pandemic's challenges, including adjusting merchandise assortments, advancing omnichannel fulfillment when stores were closed and making stores safe as they reopened. "Through this, we harness data analytics to really sharpen our offers, we're just moving faster than ever before, our metabolism is up."
Macy's is likely now benefiting from its significant investment in technology two decades ago, according to Kristin Bentz, president of KB Advisory Group. But it's a mistake to think that its digital prowess can rest on its own laurels, especially with in-store shopping "back in vogue," she said by phone.
"How do the stores look, what's the service like? You know, Macy's stores still look tragic, the assortment is terrible. There's no one on the floor, you can't get anyone to help you. It's like a ghost town in there," she said. "They are dancing on the precipice and will really need to step it up on the floor from a merchandising perspective if they want to survive. Digital alone wasn't enough to keep them afloat before the pandemic. [They have] to deftly perform with both to succeed."
Several analysts, including Bentz and GlobalData Managing Director Neil Saunders, have noted macro tailwinds — an emerging economic recovery, a fairly confident consumer and widespread vaccinations, among others — that are lifting the entire industry. Macy's is benefiting from those, as well as "some improvements to its online proposition and ... a small effort to tidy up its stores," Saunders said by email.
"As such, Macy's is in a reasonable state and has a good platform from which to build. However, I would draw the line in saying that the company is stronger than ever," he said. "There are a lot of underlying structural and operational challenges that need to be resolved in addition to the more existential question of how Macy's is evolving its brand to remain relevant. When the rising tide of high spending stops floating all boats these things will become more apparent and they remain a threat to the seaworthiness of Macy's."
While Gennette may have been keen on writing the headlines, Saunders cautioned against potential hyperbole.
"Macy's management does have a habit of putting out unrealistic statements which verge on being wildly optimistic," he said. "Everyone appreciates that they want to sell a positive story to investors, but I also hope that they understand the serious tasks ahead of them and are not being complacent."