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Behind the Curtain

A true Macy's man recollects.

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Special Issue
WWD Milestones issue 09/06/2008

Few know the Macy’s story and the personalities that energized the business in the second half of the 20th century better than Don Eugene.

The behind-the-scenes, longtime finance chief started his career at Macy’s in 1953 as a bulk packer in toys and bicycles, and shifted to the financial side as a budget director, assistant controller and ultimately corporate senior vice president for control, effectively serving as chief financial officer.

Eugene acquired an encyclopedic knowledge of the company’s budget, could tell what was included in every expense center and, for a few years, even served as president of the I. Magnin division. Macy’s also volunteered Eugene to work on the Grace Commission, for which he was reassigned to Washington for the better part of a year to help identify areas of waste in the federal government.

“Macy’s was not just a business or a store,” says Eugene, now a partner at the Callydus Group LLC, a consulting firm that he founded three years ago in New York. “Macy’s was an institution, a free university. Learning about retailing and operating successfully there conferred a pedigree on a person. Anyone who could move through the Macy’s organization could make an important contribution almost anywhere in retailing and other businesses. You felt privileged.”

When Eugene joined Macy’s, the store was being run by Jack “Mr. Jack” Straus. “He ruled with an iron hand from the Forties through the Eighties, but showed his emotional side when he broke down during a tour of the burnt-out fifth floor at Herald Square, where a fireman died fighting a blaze,” Eugene recalls.

Another chief with a big personality was Herbert Seegal, the president and chief operating officer from 1972 to 1980. “He had a dramatic fl air to reinforce a point,” Eugene observes. “Once, a junior executive found Herb lying on the floor and feared heart attack. As the young man leaned over, Herb whispered, ‘See how the spotlight hits the top button of my jacket? Then why isn’t it on the mannequin, where it belongs?’”

For more than 20 years, Eugene was a close lieutenant to Edward Finkelstein, the former R.H. Macy chairman and chief executive officer who elevated the appeal and excitement of the store, took it private but left as the business teetered in bankruptcy. “There was no part of the business that escaped Ed’s attention,” Eugene says. “Ed played a role in launching the careers of people such as Art Reiner, Bobby Friedman, Joe Cicio, Millard Drexler, Rose Marie Bravo, Frank Doroff, Julian Geiger, Hal Kahn and Paul Carlucci, among many others.”

The two worked together in their post-Macy’s days, as well, at Finkelstein’s consulting practice and at the former Cherry & Webb chain Finkelstein operated for awhile. The 1986 leveraged buyout lingers in Eugene’s mind as a seminal event in several respects. The LBO occurred when the retail and banking worlds felt that Macy’s sales and reputation could go nowhere but up, and when debt was a better idea than equity, but Eugene believes it all began with some uncertainty, long before it led to the 1992 bankruptcy.

“The LBO went forward, to the dismay of most members of the board and without most of the executives really understanding what it all meant,” Eugene reveals. “The investment bankers worked with statistical models as their way of looking at the business. The models can often provide useful information [for] making decisions. But in the end, the business people have to make the judgments, because reality is far messier and more complicated than the models can capture or depict. The LBO—it turned out to be the largest ever at that time,” at $3.6 billion.

The bankruptcy period was “unbelievable” and permeated the store with a “subdued sense of sadness,” considering how Macy’s had once represented the pinnacle of retailing, Eugene says. “We all grew up under Mother Macy and had a point of view, and when the bankruptcy happened, the creditors, the lawyers and the bankers brought points of view on how the organization had to change to save money, how it had to cut inventory, capital expenditures, so we were all busy breaking away from the old habits and trying to implement a new direction and that wasn’t always smooth. In a bankruptcy, while you think you are running a company, you really aren’t, and then of course there is a whole new board put in place.”

But the bankruptcy doesn’t taint his great appreciation for Macy’s and the career it provided. He retains fondness, even a sense of awe, for the parade of talent he witnessed. “The range of people who were associated in one way or another with Macy’s is incredible. Henry Kissinger and Beverly Sills both served on the board of directors, which was advised by people like James Wolfensohn, Laurence Tisch [also a board member], Jim Weinberg, Robert Rubin and Ira Millstein. The Macy’s mission always, for all those that worked there, was understanding what the customer wanted, in the best case, even before they did—and delivering it with flair. That challenge attracted generations of creative people with strong personalities, and talents ranging from merchandising to store display to operations to designing amazing balloons and fl oats. That’s the heritage that made Macy’s more than just a business.”

Among Eugene’s most vivid and poignant recollections of people and events at the store are:

• A strike in 1956 by Local 1-S, when Wheelock H. “Bing” Bingham, president of Macy’s New York (as it was then called), stood at the West 34th Street employee entrance every morning, greeting executives pressed into service as salesclerks, housekeepers, packers, clericals and waitresses to keep the business operating. “He did the same thing at closing time, thanking each and every person. He also initiated a daily newsletter telling executives how the store was faring. How he managed all this was beyond our comprehension. It was a rough few weeks as the company attempted to maintain regular hours and service, but he set a very high standard and kept morale very high.”

• Seegal advocating individuals to use intuition, experience and creativity in the buying, and telling his team to stock locking gas caps during a gasoline shortage. “Once they were in, selling in the men’s accessories department, we couldn’t keep them in stock.”

• At the Thanksgiving Day Parade, Finkelstein, chairman of Macy’s New York at the time, and his family arriving by Rolls-Royce, and Don Smiley, then chairman of the corporation, arriving by subway and stopping at Nedicks for a hot dog.

• Straus receiving a letter from the chairman of “the bluest of the blue-blooded banks” concerned that it was close to Christmas and a bike he purchased had not arrived. Mr. Jack called the toy buyer and learned the bike was out of stock, so he told the buyer to go across the street to Gimbels, buy the bike at retail and get it delivered.”

• The great debate over Red Star coffee, an early Macy’s private label and a basic in the grocery department. “The bean counters, no pun intended, calculated that the company was losing considerable money on every can sold. Finally, one of the Straus brothers told the financial people to back off and said, ‘When will you understand that when the lady of the house opens her cupboard every morning to make breakfast, the first thing she sees is our can of Red Star coffee? What better advertising could we have?’”

• The June 17, 1979, fire on the fifth floor at Herald Square, where a New York City firefighter, Walter Smith, lost his life. “Mr. Jack called me and asked that I accompany him to the fifth floor. The floor was still full of water and residual smoke. Wood pontoons on the floor enabled maintenance people to walk around. I wore L.L. Bean waterproof shoes and Mr. Jack, highly polished Lobb shoes. Although Mr. Jack was somewhat frail, he walked out on the pontoons to see the damage. Tears came to his eyes.”

• Bamberger’s flagship in Newark, N.J., selling wines and liquor on its main floor. “During a visit to Bam’s for a board meeting, Mr. Jack strongly suggested to the store manager that liquor should not be sold on the main floor. The store manager checked the dates of all board meetings, had tables with wheels built to roll the wines and liquors off the floor when Mr. Jack arrived and back out again when he left. This practice went on for a number of years.”

• The 1967 riots in Newark. “To protect the Bamberger flagship, a contingent of Macy’s security people, accompanied by Macy’s elite Doberman pinschers—Macy, Red Star and Suzy—were dispatched.”

• The Herald Square office of Ken Straus, head of corporate buying and the son of Jack Straus, was a shrine to the NYC Fire Department. It was filled with shiny brass hose nozzles, fire hats, fire insurance building plaques, Halligan tools and alarm pull-boxes. “Straus was an honorary fire chief, his car was rigged with a transceiver crackling reports on fi res in progress and his license plate was FD9.”

• Cicio, a former senior vice president for visual merchandise, who was instrumental in formulating the look of The Cellar, the main floor, new store designs and renovations, as well as staging lavish parties at Herald Square. “He was a master of theater. Joe had an extraordinary eye. That eye was the greatest gift to the business.”

• Mike Stemen, former senior vice president and director of stores, “the Energizer bunny” with no end to his restlessness, curiosity, creativity and optimism. “Every time we opened a new store or completed a major renovation, Mike would don an electrician’s outfit and spend the days before opening walking around with a tall ladder or an electronic lift, installing bulbs and ensuring that the lighting enhanced the merchandise and ambience.”

• Roman Weller, vice president and assistant controller of Macy’s New York, a Russian immigrant with a short temper and glib personality. “He changed selling-fl oor coverage forever. He studied customer traffic at Herald Square, where he found that our sales associates were going out to lunch at precisely the time that customers were coming in to shop—a serious mismatch. He pioneered the part-time schedule and developed ‘The Weller Chart’ to ensure that customer shopping patterns and selling-floor coverage matched.”

• G.G. Michelson, head of human resources and labor relations and a highly connected attorney who started at Macy’s on the same training squad as Finkelstein and became one of his closest confidants. “She recognized that Macy’s was a big, complex workplace, but made a point of knowing the people by name. She became a board member of several prestigious companies. If Finkelstein wanted to get to the mayor or somebody else important in the city, she was the link.”

• Herb Rackoff, administrator for merchandise statistics. “An eccentric math genius, he worked with the first mechanical calculators at the University of Michigan. He was on Eisenhower’s staff as a weather forecaster and was involved in predicting the weather for the D-Day landings. Numbers spoke to Herb. He spotted trends and errors. He could analyze things. His mental processes worked extraordinarily fast. Herb had the uncanny ability to look at a complex situation and go from concept to application.”

• Marvin Fenster, general counsel. “At one point, Finkelstein urged Marvin to block the publication of a coffee-table book about the Macy’s Thanksgiving Day Parade by a former employee. Marvin said he could not. When asked why, Marvin replied: ‘Ed, have you ever heard of something called the Constitution?’ Marvin had a blustery and argumentative side, but under the veneer of a master actor, he was quite analytical, thoughtful and powerful in argument.”

• Jack Hanson, a senior vice president and controller. “Jack’s major contribution to Macy’s was installing one of the first Univac computers. It revolutionized the back office, which had been a pencil and paper–based operation, as were most companies. Payroll, credit, payables, statistics, budget reporting and countless other manual, time-consuming tasks became more efficient and accurate.”

• Reiner, chairman of Macy’s New York who went on to become ceo of Finlay Enterprises. “He challenged the bankers’ models by asking how we can bet the store on the basis of mathematical models that go out for a 10-year horizon when we can’t even predict what tomorrow’s sales will be.”

• For a Fourth of July fireworks in the mid-Seventies, Macy’s rented a Circle Line ship to cruise the harbor so a few hundred executives and their families, as well as the mayor, police commissioner and other notables, could view the show close up. “At one point, the Coast Guard blockaded the Circle Liner because it strayed into restricted waters, and forced it to dock at Governors Island, threatening to ruin a festive evening,” though after much discussion, the ship was released with a summons returnable in court the next day.

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