It's time for Macy's to 'rally the troops,' retail analyst says

Analyst on Macy's: Management making good choices in hard environment

Macy's has three main problems to solve, according to senior retail analyst Oliver Chen:

1. Slowing mall traffic — physically getting people into stores is more difficult.
2. The rise of Amazon and off-price competitors poses a threat.
3. Consumers are fundamentally changing shopping habits, demanding speed.

With more and more innovation happening in the retail sector at large, Macy's needs to focus on its supply chain operations and getting products to customers quickly, Cowen and Co.'s Chen told CNBC's "Power Lunch" Thursday.

Technology and digital will be important areas for all retail companies, especially Macy's, moving forward. E-commerce giant Amazon is growing faster than anyone can expect, he added.

"[Macy's] is closing 100 stores, e-commerce is increasing, and we could see more store closures," Chen warned. "This is their plan for now … and I think they're off to a good start."

Mary Altaffer

Former Chief Executive Terry Lundgren, who has been at the company's helm since 2003, stepped down from the position Thursday.

Jeff Gennette, who was elected president of Macy's in 2014, will assume the CEO role during the first quarter of 2017.

This transition comes not only at a tough time in the retail sector, but for Macy's specifically, which has reported eight straight quarters of comparable sales declines.

"It's time to rally the troops," Chen told CNBC. "The important thing is to motivate Macy's from within," and there are a lot of cultural changes going on, asking for someone from inside the organization to step up and create solutions, he said. "Setback is a setup for the comeback."

Overall, retail analyst Chen still believes Macy's management is making "good choices in a hard environment."

Chen maintains a market perform rating on the stock, with a $44 price target.

With slight gains on Thursday, shares of Macy's are still down more than 20 percent for the year and are down more than 30 percent over the past 12 months. Shares closed slightly under $29 Thursday, the day of Lundgren's departure.

Macy's year-to-date performance

Source: FactSet