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Allen Questrom’s master plan shaped the Macy’s of today.
Allen I. Questrom has an adventurer’s taste for rescuing retailers in distress.
During his career, Questrom has not only returned companies on the brink back to life, but, even more, made them buzz-worthy. What contributes to his reputation as retail’s Mr. Fix-It is the fact that he’s pulled off this feat more than once—and Macy’s was one of his biggest projects.
Questrom got his retail start as a management trainee at Federated Department Stores in 1964, rising through the ranks to become chairman and chief executive officer of the former Rich’s division in 1980 and of the former Bullock’s division in 1984. He was promoted to executive vice president of Federated prior to the company’s takeover by Campeau Corp. in 1988, after which he left the group. Questrom then proved he also understood luxury products when he became president and ceo of Neiman Marcus Stores from 1988 to 1990. He subsequently returned to Federated as chairman and ceo, staying until 1997. Questrom’s high-end expertise was called upon from May 1999 to September 2000, when he was president and ceo of Barneys New York. Then he segued to the moderate market when he joined J.C. Penney as chairman and ceo in September 2000.
Among Questrom’s biggest achievements was wresting Federated Department Stores from Chapter 11 in 1992 and doing the same with Macy’s by merging it into Federated in 1994 in a $4.2 billion reorganization. Questrom makes no bones about the expediency of Federated’s acquisition of Macy’s under his leadership. “I had wanted to buy Macy’s a couple of years before we bought the company,” he recalls. “I watched very carefully what was transpiring. As Macy’s got into diffi culties, it became more of an opportunity for us. It was very opportunistic.”
The retired ceo revealed one of the secrets to his success: adaptability. “The world goes forward and you’re going to constantly keep changing the way you do things,” he says. “Some people don’t like those changes.
All along in my career as a retailer, I had to keep changing. I had a wardrobe of different skills I was able to apply to the next job. Today there are all kinds of opportunities. We’re in business to make money. We’re not in business for anything else.”
The hard-won Macy’s acquisition burnished Questrom’s reputation. At the time, Macy’s ceo Myron E. “Mike” Ullman 3rd wanted to keep the retailer independent, but Federated was able to prevail because it had bought Macy’s debt. “We had much more leverage,” Questrom explains. “They had no sway in the deal.”
If Macy’s hadn’t been acquired, Questrom notes, “it would have been a troubled company.”
Questrom says he approves of Federated’s strategy of acquiring May Department Stores in August 2005 for a total of $17 billion in equity and debt, and converting the May store nameplates to Macy’s. In fact, he says he had intended to take Macy’s national and international when he was Federated’s ceo.
“It’s taken time to consolidate and move things together,” he says. “I thought it was a good idea then and I think it’s a good idea today, even more so. If you go back in time, Federated and May had many different names for their divisions. The U.S. is much more of a nation, you don’t see that many differences between states. There was really no May Co. name and Federated had no name [that could be expanded on a national stage]. The only one that really had a national presence was Macy’s. Because it put such a good effort into the Macy’s Thanksgiving Day Parade, it was recognized by people all over the country.”
Parade or no parade, Macy’s was still a bankrupt company and Federated itself was under bankruptcy court protection 14 years ago when it made the acquisition. What’s more, all this unfolded during difficult economic times. “Getting Macy’s out of bankruptcy and recognizing early on the importance of the Macy’s name and how it could be good for Federated was important,” Questrom says. “To get them out of bankruptcy and back on very sound financial footing was a very big accomplishment.”
Questrom cross-pollinated Macy’s and Federated executives, indoctrinating the former into the latter’s culture. “It didn’t take very long for the Macy’s people to get accommodated and understand what the game
was,” he remembers. “We learned from them and they learned from us. I was very impressed by the people. We salted the organization with people from Federated. I moved my office right to Macy’s 34th Street flagship. Federated’s corporate administration was in Cincinnati, but I maintained an office in New York. I knew it was important to be there and be a part of it. I’d go to Cincinnati every week, but I spent more of my time in New York visiting all the stores.”
Macy’s gave Federated—whose nameplates also included the likes of Stern’s and A&S— the fashion credibility it sorely needed. “Macy’s was very important because it helped upgrade our assortments and make them fashionable,” Questrom says. “Macy’s West was much more fashion-forward. We would use the strengths of different divisions to really learn from one another and gain successes and apply them to one another. We put in a lot of the financial disciplines that Macy’s didn’t have. Together, we made it a better equation. The whole was better than the sum of the parts. My role was taking the best of the different pieces and putting them in a mixing bowl.”
Since retiring from Penney’s in 2005, Questrom has been a partner with Lee Equity Partners LLC and has served on various boards, including Wal-Mart’s since 2007. He’s been lured out of retirement more than once, challenged by the idea of turning around another retailer, but this time, he said he’s retired for good. “I miss the people,” he explains. “I don’t necessarily miss the 16-hour days and the commitment that you’ve got to be there all the time. I don’t miss the obligation. I miss the day-to-day action. I’ve gone through so many of them [turnarounds]. I liked the merchandising and the operations sides of the business. I got to like the press and I liked the marketplace. It was time-consuming and you don’t have time for other things. But to me, it’s still the most exciting business. I don’t miss it, but I loved
every minute of it.”