Macy's (M) had lost its way.
CEO Jeff Gennette may not use those exact words, but he has acknowledged that his company had its work cut out for it, while also asserting that it has made some progress. However, you don't talk like he did during the retailer's fourth-quarter earnings call if you think everything has been going well.
"We continue to make good progress on the transformation of our company and build momentum. And we are much better positioned for long-term success. Our business has changed dramatically since 2019 when we began to lay the groundwork for our Polaris strategy," he said.
Polaris is a three-year plan that has five main components, including strengthening customer relationships, accelerating digital growth, optimizing its store portfolio, resetting its cost base, and curating quality fashion.
One piece of curating quality fashion has been, or at least will be, developing in-demand owned-and-operated (O&O) brands. That's something Target (TGT) has done incredibly well and Macy's plans to literally take a page, well a person, out of its rival's playbook to make that happen.
Image source. Shutterstock
Macy's Wants More Target
When a rival has a big lead on you, it makes sense to hire away one of its core employees to see if you can borrow some of that magic. That's exactly what Macy's has done in hiring former Target executive Emily Erusha-Hilleque as senior vice president for Macy’s private brands.
In her new position, Erusha-Hilleque "will lead the nameplate’s private brands design organization, including apparel, center core and home design teams as well as drive the private brands strategy in partnership with Macy’s merchandising and sourcing teams, according to a press release.
Private brands is another way to say owned and operated. While at Target Erusha-Hilleque served as design director of Ready-to-Wear, Young Contemporary Private Label, Design Partnerships. In that role she was responsible for building, launching and growing the first Gen Z + Culture-focused private label, WILD FABLE, and designer collaborations including Levi’s, Christopher John Rodgers, Alexis, Rixo, Nili Lotan, Sandy Liang, Victor Glemaud, Rachel Comey, Christian Robinson, and LEGO .
“Establishing our private brand portfolio as our differentiator is a key tenet of the Win with Fashion and Style pillar of our Polaris strategy," said Chief Merchandising Officer Nata Dvir. "Emily brings leadership and expertise in creating industry-disrupting brands and driving successful product design and merchandising strategies."
What Dvir can't exactly say is that Macy's wants to capture some of Target's magic. O&O brands have been a key part of the retail chain's turnaround under CEO Brian Cornell. So, since he can't say that, the CMO spoke more in more vague terms.
"She has her finger on the pulse of the consumer and on trends. She will ensure that our private brands reflect our customers’ wants and needs across categories. I know she will be pivotal in propelling our merchandising transformation forward,” he said.
How Is Macy's Doing?
Macy's may not have captured the "Tar-Jay" magic where customers love it (some certainly do) but Gennette has done well at managing his company's performance.
"Comparable owned plus licensed sales for the fourth quarter increased 6.1% versus 2019," he said during the Q4 call. "...For the year, comparable owned plus licensed sales increased 3% compared to 2019. For the year, we generated $984 million more in adjusted EBITDA than 2019, growth of 42%."
It's not overly sexy, but the CEO has put his company onto safer ground to try to move into the next phase of its comeback.
"With reduced debt and ample cash, our balance sheet is healthy, and we are in a stronger financial position. This enables us to navigate challenges that lie ahead while meeting our capital allocation goals to deliver shareholder returns through modest yet predictable dividends, strong returns on invested capital, and meaningful share repurchases," he said.
