Here we go again! Macy's launches 'A Bold New Chapter' that isn't very new or very bold in omni-channel retail terms

Stuart Lauchlan Profile picture for user slauchlan February 28, 2024
Summary:
Macy's has a plan - or rather, Macy's has another plan! What chance that new CEO Tony Spring can pull this one off?

macy's

Look, stop me if you’ve heard this one before, but Macy’s has a new plan to become an omni-channel retailer with a credible future.

Yes, I told you we'd been here before, but on the back of another set of appalling quarterly numbers, the (next) last great hope comes in the shape of another stab at a turnaround strategy, this one modestly entitled A Bold New Chapter. 

Q4 numbers for the US retail icon saw net sales down 1.7% year-on-year at $8.1 billion, while a profit of $508 million for the comparable period last year collapsed into a loss of $71 million. Digital sales were down four percent year-on-year. 

It’s a baptism of fire for CEO Tony Spring who took over from long-standing predecessor Jeff Gennette earlier this month, particularly with hostile takeover activists lurking in the wings. 

What's new? 

So what is this Bold New Chapter all about? And how does it differ from Gennette’s high-profile Polaris three year plan that only ended last year? That was mostly about slashing the retailer’s real estate portfolio, while pushing heavily into digital, most notably in the form of online marketplaces. 

Well, closing stores is still very much part of the next chapter with 150 outlets in the firing line, including the flagship San Francisco arm in a move that is further evidence of the retail apocalypse in that city.

Beyond that, the latest plan is to focus on enhanced customer experiences to build stronger personal relationships between the retailer and shoppers, as well as more focus on digital growth. Again, stop me if you’re experiencing strategic déjà vu as that’s pretty much a large chunk of what Polaris was supposed to deliver. 

But this is different, is the message coming from the firm.  According to Spring: 

It is the thoughtful culmination of comprehensive research and reflection that began in earnest early last year. A Bold New Chapter is designed to return Macy's, Inc.'s enterprise growth, unlock shareholder value and better serve our customers. It builds on our five growth vectors as newly-identified and stress-tested areas of opportunity and is supported by our financial disciplines. Over the next three years, we intend to one, strengthen the Macy's nameplate and return it to top line growth; two, accelerate luxury growth; and three, simplify and modernize end-to-end operations.

He adds: 

In setting our Bold New Chapter strategy, we've been our own toughest critics. We have challenged the status quo, identified what we've gotten right and where we could have done better. We also conducted external focus groups and surveys with current lapse and potential customers. We're driving a higher level of accountability amongst our teams to ensure we keep up with customers evolving taste, needs and preferences.

Coming as he does from many years at Bloomingdale’s, Spring argues that he’s able to look at Macy’s with “an outsider’s point of view”, arguing: 

There are a few brands that have the deep heritage and a strong emotional connection with its customer. But as we conducted surveys and focus groups with some of our 41 million active multi-generational customers, it became increasingly clear that the needs are not being fully met.

They want an omni-channel shopping environment that's neat, easy and convenient and edited and updated selection of relevant trending products, clarity on value and pricing and greater availability of colleagues to find product and complete a purchase. This list is similar to what I first encountered at Bloomingdale's. While there are certainly differences, the core formula for success is the same. It's going back to basics and balancing the art and science of retail.

What's bold? 

From a digital perspective, opportunities are identified for online to act as a “gateway for customers to research, discover, connect and transact with Macy’s”. The retailer acknowledges that it is “imperative to show up with the inspiring content at the right time, place and value”. 

OK, that’s pretty much omni-channel basic theory that frankly every retailer ought to have had written into their thinking for years. What about the practical execution, the aspect on which Macy’s has fallen short for too long? The new strategy identifies three key digital initiatives: 

Re-evaluated foundation to improve search and navigation tools. 

Customers can expect to be offered personalized communications and recommendations that have a definitive Macy’s point of view - culminating in an efficient and speedy checkout. 

Expand Marketplace and Macy’s Media Network to improve profitability and increase customer engagement. 

Simple, huh? There will also be back-end activity as part of the wider strategy. Spring states: 

We are committed to delivering a more efficient operating model that better serves our customers. Over the next three years, we have plans to rationalize and monetize our supply chain asset portfolio, streamline fulfillment, improved inventory planning and allocation and deliver a more scalable technology platform.

Picking up on this, CFO Adrian Mitchell explains: 

We also plan to streamline and automate business processes. We will leverage this across the Macy's Inc. portfolio. These efforts are already underway and encompass reducing dependency on expensive software and hardware by consolidating our vendor base, simplifying our application portfolio by moving over 90% from on-premise to the cloud and eliminating mainframe application which reduces expensive consumption. 

And, inevitably, there’s an AI angle as he adds: 

Embedded in our end-to-end operations is AI, which helps speed up decision-making through access to real-time data and tools. As an organization, we continue to build our data, science and AI capabilities in areas such as forecasting, inventory allocation, workload optimization and pricing. We are also experimenting with generative AI that should help improve customer and colleague experiences.

My take

We are leaders not followers. While we have missed the mark in some years, we're self-aware and have developed a bold strategy to deliver a better experience for our customers.

The earnings call presentation yesterday opened with a slide declaring, “We must up our game and have an even stronger call to action”. I hope that Spring can pull this off, I really do. But so much of what has been revealed about A Bold New Chapter so far isn’t new or particularly bold. It’s omni-channel retail 101 stuff that was supposed to be being done as part of the Polaris three year strategy just ended.

That really begs the question - unanswered - of whether we should therefore assume that the previous plan didn’t work? Or at least, didn’t work well enough? 

Whatever the case, this is all going to take time. Spring and Mitchell were careful when talking to analysts yesterday to lay out that things are going to get worse before they get better, positioning this year as “a transition and investment year as we begin to implement real change for our customers”, followed by “low, single digit growth” to come in 2025. In other words, the message to investors is, please bear with us and give us more time! With further unwelcome takeover bids only too likely, that might turn out to be a very, very big ask. 

Anyway, here's to the future. One more time for luck, eh? 

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