SpotlightOctober2016

By Jamie Barrie M acy’s new CEO was expected to transition the company from a bricks-and-mortar organiza- tion to more of an online retailer. That transition started this week when the company announced it would close 100 stores. This 14 percent reduction in storefronts totals more closures than the last six years combined. Incoming Macy’s CEO, Jeff Gennette called the move a significant step towards mounting a comeback for the retail giant. The CEO said the move was “an advance- ment in our thinking on the role of stores.” Ironically the stores are money makers but sales have seen a steady decline. Macy’s expects revenue to decline 3 percent rep- resenting about $1 billion U.S. Investors have been telling Macy’s they wanted to see store closures and a move to a greater online presence. This move saw shares in the retailer jump 16 percent in the first 10 minutes of trading after the announcement. That was good news after a 3 percent decline in August added to a 50 percent decline this past year. While the online move will involve a small drop in revenue expectation at the store level, Mary’s is betting on these lost store sales reappearing in the online sales totals.

in assets held in real estate. Macy’s is getting less bang for its buck with each dollar it spends. The men’s store that Macy’s owns in San Francisco’s Union Square is up for sale and the company is in negotiations on that property. Unfortunately for investors this is the only news that is being shared publicly about Macy’s real estate holdings. Another challenge for the incoming CEO is to find a way to build better relationships with key brands such as Coach, Ralph Lauren, and Michael Kors. Experts feel that Macy’s also needs a better competitive strategy with Amazon the world’s largest online retailer. Macy’s was an early adopter of online retail sales which is why it is the second largest retail apparel products online sales. Amazon, who is number one, had sales growth of 48% last year compared to 15% for Macy’s. Gennette doesn’t fully take the reins until 2017. Many are impressed recent announcement but investors suggest it is only the beginning of many changes they would like to see in the retail giant. The message to the CEO has been we like you shaking things up but in order to rebuild the company this trend is going to have to continue for some time.

CEO, Gennette still has a problem. His company has not yet told investors what they will do with the $21 billion U.S.

38

SPOTLIGHT ON BUSINESS • OCTOBER 2016

Made with FlippingBook - Online Brochure Maker