Longtime Macy’s Executive Takes Helm as Retailer Faces Uncertain Future
Macy’s Inc. announced on Friday that it has appointed company veteran Tony Spring as its new Chief Executive Officer, effective February 4th. He succeeds outgoing CEO Jeff Gennette, who will retire after nearly five years leading the beleaguered department store chain.
The appointment of Spring, who has been with Macy’s for over 30 years in various executive roles, comes at a pivotal moment for the retailer. Macy’s faces immense pressure to transform its brick-and-mortar business model to adapt to a retail landscape increasingly dominated by e-commerce giants like Amazon.
Slumping Sales and Store Closures Set Stage for Leadership Change
Macy’s has struggled in recent years amid the rise of online shopping and declining foot traffic at malls. The company’s sales have slumped for multiple quarters, prompting plans to shutter 125 stores over the next three years. Last month, Macy’s reported that sales at stores opened at least a year fell 2.1% in November and December compared to the same period in 2021.
The retailer also warned that it expects “continued muted sales” until at least Fall 2024 due to high inflation and recession worries dampening consumer discretionary spending.
This prolonged slump was the backdrop for Gennette’s forthcoming retirement after four years leading the company. According to The New York Times, Gennette was under increasing pressure from Macy’s board and investors to turnaround flagging growth.
Analysts speculated that if Gennette failed to show signs of progress, the board could seek an external replacement or sell the company. Instead, they are betting on industry veteran and company lifer Tony Spring to shepherd a revival.
Key Financial Figures Behind Leadership Change
| Metric | 2022 Q3 Performance | Change from 2021 Q3 |
|---|---|---|
| Total Sales | $5.23 billion | Down 3.1% |
| Comparable Sales | Down 4.4% | Down 6.1% |
| Digital Sales | 34% of total sales | Down 9% |
| Operating Income | $272 million | Down 22% |
Data Source: Macy’s Q3 2022 Earnings Report
New CEO Faces Myriad Challenges to Company’s Future
As Spring steps into the role of CEO, he inherits a company facing immense uncertainty about its future relevance and business model. The era of the department store seems to be ending, with younger consumers flocking to fast-fashion chains and online merchants.
Spring’s inbox will be bursting with strategic questions on his first day, according to analysts:
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How aggressively should Macy’s shutter underperforming stores? Macy’s plans to close 125 stores are already quite drastic. But will even more closures be needed to stem losses and invest in e-commerce?
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Can Macy’s revive in-store sales or is the future mostly online? Shopper traffic and sales are falling steadily. Can improved merchandising, discounts and in-store tech bring people back or should resources go to the website?
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Should Macy’s spin off its e-commerce division? Digital sales are now 34% of revenue. Could Macy’s unlock value by separating macys.com into a standalone company?
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Will cost cuts and operational changes be enough? Macy’s aims to remove $100 million in costs annually and improve inventory management. But analysts say a deeper reinvention of merchandising and branding is needed.
The threat of activist investors and acquisition suitors still looms large for the beleaguered company if Spring’s plans fall flat. But the CEO expressed optimism that the retailer can modernize itself under his leadership.
Veteran Company Executive Seen as Safe Choice
In selecting their new CEO, the Macy’s board opted for a steady hand rather than an outside visionary. Spring has worked at the company since 1994 in various roles, including executive positions overseeing store design, marketing technology, and online retail.
Most recently, he served as Macy’s Head of Corporate Strategy. In this capacity, Spring helped develop the Macy’s “Polaris” turnaround strategy centered on cost cuts and improving digital operations.
Retail analysts say choosing an insider gives Macy’s the advantage of continuity and signals confidence in the company’s current direction. But some experts question if fresh perspective is needed from beyond the company’s walls to spark more transformational change.
The board highlighted Spring’s decades of retail experience and leadership navigating digital disruption as key assets for his new role:
“Tony has a deep knowledge of retail, the consumer experience, and the importance of culture and values,” said Macy’s Lead Independent Board Director Paul Varga. “He is well equipped to guide the business through its omnichannel evolution and to bring teams together to drive continued innovation.”
In his statement accepting the position, Spring reaffirmed his commitment to strengthening Macy’s omnichannel retail model while also hinting he will put his own stamp on strategy:
“It is an incredible honor to lead this company and I am humbled by the opportunity…While challenges still exist ahead, I am confident we have the right plans in place to navigate them and look forward to advancing our strategy.”
Tony Spring’s Executive Profile
- 30+ years with Macy’s
- Previously Head of Corporate Strategy
- Oversaw creation of Macy’s “Polaris Strategy”
- Known for championing digital innovation
- Started career managing in-store planning
Whether Spring’s balanced skillset will be sufficient to transform the declining retailer remains to be seen. But he enters the role with the full backing of the board.
Activist Investors Circle as Takeover Speculation Swirls
Even before Spring was appointed CEO, activist investors were agitating for significant changes at the company. Reports emerged in late January that activist hedge fund Jana Partners took a large stake in Macy’s to push for potential spin-offs or a sale.
In the wake of the CEO announcement, analysts say these activist pressures make it likely Spring will face intense scrutiny and short timelines to show progress reviving the business.
The threat of a hostile takeover also looms large. Industry observers have floated privately-held retailers like Kohl’s or even e-commerce behemoth Amazon as potential suitors if Macy’s continued to flounder. For now, experts think the board wants to give Spring 12-18 months to execute his vision before considering acquisition offers.
But the clock is clearly ticking for the new CEO to deliver results and shareholders will have little patience if sales and profits continue spiraling downward.
Macy’s Faces Mounting Pressure for Fast Results
| Key Interests | Demands | |
|---|---|---|
| Activist Investors | Spin-off digital business Sell off real estate Explore acquisition |
Publicly pressure board and Spring to rapidly unlock shareholder value |
| Private Equity Buyers | Acquire Macys.com division Gain retail footprint |
Attractive valuation if stock stays low |
| Jana Partners (activist fund) | Board seats Governance changes |
Large stake to force culture shift starting from top |
Table data compiled from media reports on Macy’s strategic situation
Spring will need to appease investors and rebuff potential acquirers by delivering a credible growth strategy focused on Macy’s loyal yet shrinking customer base. Analysts think he has 12-18 months to show enough progress before facing intensified demands to break up or sell the languishing retailer.
Outlook: Uphill Battle to Modernize Iconic Retail Brand
Tony Spring steps into the role of Macy’s CEO at one of the most challenging moments in the company’s 100+ year history. The former stalwart of American retail contends with outdated store concepts, operational inefficiency and stiff competition from e-commerce players encroaching on its market.
But the company retains strong brand equity and loyalty among its aging customer base. By leaning into its heritage while updating its focus to omni-channel retail, analysts say Macy’s still has a path to regain relevance, though the way forward remains murky.
Spring will look to build on select bright spots like 40% annual digital sales growth for its luxury Bloomingdales division. He will also oversee the continued buildout of mini “Market by Macy’s” stores providing curated assortments to localized shoppers.
However, the days of moderate predictability and stability in retail are long gone. Radical transformation centered on customer experience and convenience will likely be required to ensure the survival of this iconic American brand. After years of tweaks and half-measures, the time for timid change has passed.
The mettle of Macy’s new CEO will be severely tested as he navigates an uncertain future filled with impatient investors, downsizing pressures and potential acquisition bids looming on the horizon. For Tony Spring and the company he has helped shepherd for 30 years, this leadership challenge will define careers and legacies.
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