While on the one hand there is nothing all that surprising about Macy's CEO Terry Lundgren tellings his investors that Macy's is ready to spring into a big comeback, one has to admire that boldness, considering Lundgren just had his pay docked and his firm is coming off a truly regrettable earnings report.
Lundgren noted that he isn’t concerned about the big, bad Amazon wolf or the predictions that it will soon be bypassed as the country’s largest apparel seller. Lundgren instead promised Macy's would be poised for a repeat of the phoenix act it did after the 2001 recession and after the Great Recession of 2008.
Moreover, Lundgren took a swipe at Amazon's profitability, noting that a No. 1 ranking isn't actually everything.
"It's not important for me to be No. 1 or No. 2," he said. "It's important to me to be a profitable retailer."
Lundgren also emphasized initiatives like Macy’s off-price Backstage stores, Last Act apparel clearance spaces, which have been rolled out to all stores; and beauty and spa services retailer Bluemercury, which will expand to 115 stores by the end of 2017. And while those maybe favorable augers, the fact remains that Macy's saw sales drop 7.4 percent last quarter, stemming from the closure of 41 stores. Same-store sales, however, were also on the downward slope, falling 5.6 percent and in decline now for five straight quarters.
"We view the setbacks of 2015 and early 2016 as a setup for a comeback that we expect to begin in the second half for 2016 and move forward from that point," Lundgren said Friday.
The diagnosis, on Lundgren's view, is shoppers focused on price over value or quality and the corresponding promise to beef up those off-price offerings like Backstage. However, it remains to be seen if that approach will have costs, as some upscale brands have indicated they might pull back their presence in stores like Macy's, where discounting reigns supreme these days.
Macy's may also face a brewing labor battle. Just ahead of the shareholders meeting, some 5,000 employees at four New York City Macy’s stores voted on Thursday to authorize a strike if a fair contract isn’t negotiated by June 15, according to the Local 1-S of the Retail, Wholesale and Department Store Union.
The union's main issues in the potentially brewing fight are cuts in retirement benefits and “harmful changes” in scheduling and other work rules, according to a press release.
“The magic of Macy’s will be lost if the company uses this contract negotiation to put so many dedicated employees on the clearance rack,” Local 1-S president Ken Bordieri said in a statement. “When our members are constantly worried about making ends meet and paying for unaffordable health care, they won’t be able to deliver the customer service that keeps millions of shoppers coming back every year. We urge the company to meet us at the bargaining table with a fair contract.”