Macy’s faces long road back after takeover fizzles
Still, new CEO Jeff Gennette has plenty of leeway for his turnaround plans
In a sudden turnaround this month, Macy’s appears to be free to find new ways to grow after a key investor has pulled out and a potential rival is shopping elsewhere for a takeover target.
An investor favorite as recently as 2015, Macy’s has been scrambling to spur sales after a string of earnings and sales disappointments. Pressure intensified that summer when Starboard Value LP purchased a major stake in the Cincinnatibased retailer and pressed it to sell off real estate assets.
Macy’s cut expenses and shuttered stores. It sold off all or parts of some pricey store locations. It pursued multiple new growth initiatives. Longtime CEO Terry Lundgren announced he would step aside, and Macy’s fired its top executive in charge of growth. But sales continued to slump amid a nationwide mall and retail slowdown, prompting Macy’s stock to lose half its value.
Lastmonth, it appeared Macy’s plight might go into overdrive amid reports of a potential takeover by Saks owner, Torontobased Hudson’s Bay Co.
An acquisition by Hudson’s Bay, a much smaller rival, probably would have been paid for in part with massive cuts. Indeed, the potential deal was so daunting, reports emerged that financial backers were resisting bankrolling a serious offer.
Then on March 14, after a year and half of drama, Macy’s cloudy future became much clearer. The Wall Street
Journal reported Hudson’s Bay had shifted its sights to Macy’s smaller rival, Neiman Marcus, with takeover talks in early stages. The following day, Reuters reported that Starboard Value LP had sold off its Macy’s stake, signaling an end to its campaign to influence corporate strategy.
Wall Street analysts say Macy’s still has a long road to return into investors’ good graces. But with no looming takeover or no activist investor meddling in its affairs, new CEO Jeff Gennette has leeway to implement, refine and experiment with his turnaround plans. At an industry conference March 14, Gennette outlined only modest tweaks to strategy.
Gennette took over as Macy’s CEO on Thursday. Lundgren will become the company’s executive chairman.
So far, Gennette’s plans appear to be a lot of dabbling with more discount sections in Macy’s stores, more stores within Macy’s stores, a wider selection of private- label beauty products, fewer coupons and even self- serve shoe departments.
Howard Davidowitz, chairman of New York retail consultants Davidowitz & Associates, says stay tuned — things could change faster as Gennette takes charge.
“Turned loose, I think this guy’s going to do something big,” said Davidowitz.
Dedicated Macy’s customers say they like some of the ideas the department store is experimenting with, but they hope potential changes don’t come at the expense of good deals or their shopping experience.
“Macy’s is one of the better department stores: It’s clean and well organized — Kohl’s, even Dillard’s sometimes, have so much stuff jammed in them, it’s overwhelming,” said Suzanne Borgemenke, 48, an IT analyst who works in downtown Cincinnati. “I’m also not a fan of full price — and Macy’s always has great sales.”
Among some of the changes Macy’s has implemented are moving clearance items to dedicated sections, dubbed “Last Act.” Company executives say the sections allow bargain- hunting customers to find deals more easily. Coupons don’t apply to merchandise in the section, but goods are priced as much as 85% off the original cost.
Moving clearance to a special section also allows Macy’s to stock more full priced items on its regular sales floor.
Macy’s is not discontinuing its frequent sales on regular, non- clearance items. But company executives believe they will sell more bargain and more regular items if they are clearly separated and priced, boosting overall sales and maximizing profits.
Analysts say Macy’s is carefully preserving its sales- event culture, mindful of J. C. Penney’s 2012 attempt to switch to an everyday low pricing format.
Though Penney’s went back to coupons and frequent sales in less than a year, the retailer’s revenues have yet to recover after plummeting more than $ 4 billion, or nearly 25%, in 2012.