Jeff Gennette, the president of Macy’s Inc., has a big wish list and a “purposeful” agenda.
The Gennette prescription on how to grow the $28.1 billion department store chain entails being “maniacal” about digital growth, taking greater initiatives in wedding-related merchandise, improving the tabletop business and making “outsized” investments in men’s and women’s athletic and ath-leisure apparel and athletic footwear.
Athleticwear is one category where Macy’s needs to catch up, Gennette suggested, but is stepping up the buy on such brands as Nike, Under Armour and Adidas. “When you look at Macy’s overall share in men’s and women’s apparel, we still retain a lower share in athletic apparel. We are really looking at whole active influence across all categories in the store.”
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He also wants to deepen customer loyalty and believes that one way to accomplish that is to make Macy’s selling floors more “experiential.”
And as far as leased and licensed businesses, versus the traditional wholesale-retail business model, he’s open to all of it, if it brings in categories that Macy’s shoppers want and Macy’s may not carry.
“We have a laundry list of categories [where] we believe the Macy’s brand is broad enough to bring into our stores with great credibility,” Gennette said.
He didn’t cite any, but wearable tech, home electronics and other hard goods, as well as new types of services and food, could be on the table for discussion.
Gennette, who has emerged as the lead candidate to one day succeed Terry J. Lundgren as Macy’s chief executive officer, two weeks ago was reassigned to focus on big-picture growth initiatives. He was promoted to president a year ago and no longer serves as the day-to-day chief merchant. Tim Baxter now has that role. Another big change was putting Peter Sachse in charge of exploring a potential Macy’s entry into the off-price business, international strategies and ways to innovate the business. Sachse was in charge of stores before.
The shifts spotlighted the corporation’s intent to give Gennette and other executives broader knowledge and wider perspective on the business. It’s part of the grooming process that Macy’s uses to build bench strength.
The reorganization at the top “cracks open the next level of growth for us,” as well as improves the corporation’s speed and efficiency while reducing the complexity of the organization, said Gennette, who spoke at length about Macy’s future at the Bank of America Merrill Lynch Consumer and Retail Conference.
Macy’s, he said, has started a “new journey” that involves adding experiences to the selling floors, including Nike “training clubs” with trainers in women’s active areas working with customers and special products. The training clubs are in five Macy’s locations, but rolling out to 60 by the end of the year, Gennette said. He sees Macy’s as “an opportunity to educate and entertain,” and not necessarily just with athleticwear.
Among other growth moves, he cited Macy’s new Thalia Sodi private brand, the store’s first such brand to launch in multiple categories at the same time. “We have it in 300 doors and we are already sizing up how much bigger this thing could be.” It’s also sold on macys.com.
Thalia launched three weeks ago and has been an “out-of-the-box success, far exceeding plans,” Gennette said. “It really hooks into the dress trend” that the country has been experiencing. Macy’s officially launches Thalia with a reception and fashion show at Macy’s Herald Square today.
Generally speaking, sportswear at Macy’s “has not been as strong” as dresses, Gennette noted.
In his report on several parts of the business, Gennette noted the new Martha Stewart Whim home line has reached stores and is successful online.
With Lids, the affiliation is “in its infancy right now, but the initial reads on it is that we’re going to make this much bigger.”
Sunglass Hut, a licensed partnership, is garnering “huge comps” but less from units and more from AUR [average unit retail].
Macy’s acquisition of Blue Mercury is expected to close soon and will not be accretive to earnings in 2015, but should be next year, after Macy’s starts to roll the brand out to more of its stores and open Blue Mercury stores.
Overall, “center core and beauty continue to be big pursuits for us,” Gennette said.
He reiterated the conservative forecast for 2 percent comparable-sales growth for 2015, which will be “a transition year” where investments and organizational changes take hold to create the foundation for expected bigger growth rates in 2016 and after. The $28.1 billion company, operator of Macy’s and Bloomingdale’s, expects total sales to grow just 1 percent and comparable sales to gain 2 percent in 2015. Earnings of $4.70 to $4.80 a share are seen, which is about 3 cents shy of what analysts have been expecting. The best-performing categories recently have been coats, active, dresses, handbags, younger Millennial apparel, men’s and women’s shoes, cosmetics, furniture and mattresses. Housewares and tabletop have been weak.
In terms of how his own role at Macy’s has been recast, Gennette, regarded as one of the nation’s top merchants, said he is being “purposeful about what I am going to focus on and what I am not going to focus on.”
He said he would stay “very connected” to center core, with “more jewelry opportunity ahead of us.” He also said he would focus on “keeping women’s shoes healthy and getting the category even healthier.”
Generally, “There are select vendors that I would be very involved with,” Gennette said, citing VF Corp. as a strong partner.
He also said he would focus on talent development, data science, and Macy’s “top door strategy” by getting very involved in changes in those locations. Top Macy’s doors would include Herald Square and downtown Brooklyn, as well as in San Francisco’s Union Square and on Chicago’s State Street. Macy’s is working on a redevelopment plan for the downtown Brooklyn store, but has yet to disclose the strategy.
Also high on Gennette’s wish list: a positive trend in women’s ready-to-wear. The category has been soft industrywide for a few years due to a lack of innovation and newness and consumer spending shifts.
“I would love to see ready-to-wear participate in the growth of our company,” Gennette said.