Macy's tries to convince Wall Street that America still needs department stores

Key Points
  • Macy's is going to focus on three pillars: Its role as a fashion destination, its role in providing value to shoppers and its role in celebrating America with events like its Thanksgiving Day parade.
  • Macy's must find ways to reach younger customers, as their spending power grows.
  • Macy's shares are rising, as the retailer holds a meeting with investors.
Mario Anzuoni | Reuters

Macy's is making the case to investors that it is still "America's department store."

As the embattled retailer aims to get back to profitability and sales growth, it is meeting with investors Wednesday in New York to rally support for its turnaround plans. Among the key points it is making are that shoppers still go to malls, and that a department store chain can still offer customers something unique that they can't just buy on Amazon.

To get back to growth, Macy's is focusing on three pillars: Its role as a fashion destination, its role in providing value to shoppers and its role in celebrating America, CEO Jeff Gennette said, hinting at Macy's events like its Thanksgiving Day parade.

A key test of this plan, however, will be if Macy's can reach younger customers, as their spending power only grows.

"Macy's needs to quickly re-capture lapsed customers and connect with new [and] younger shoppers before it's too late," Gordon Haskett analyst Chuck Grom said.

Department stores over the years have gained a sour reputation. Sales have lagged behind other types of retailers such as T.J. Maxx and Target, as traffic at weaker malls has dropped off, and companies like Sears and Bon-Ton have filed for bankruptcy.

"We are stepping up to redefine what a department store can and should be," Gennette said during the investor meeting at the New York Stock Exchange.

Late Tuesday, Macy's announced a major restructuring, in which it plans to shut 125 stores over the next three years, cut 9% of its corporate workforce and close some offices in Cincinnati and San Francisco. The steps Macy's is taking are expected to generate about $1.5 billion in annual savings, which will be fully realized by the end of fiscal 2022, and partially reinvested back into its growth initiatives.

Macy's is still, however, forecasting same-store sales, on an owned plus licensed basis, to be down 1% to flat three years from now, in fiscal 2022.

"We have some legacy challenges," Gennette told investors, explaining that the company grew so large because of a series of acquisitions of smaller chains. "But we do have a lot on our side."

Macy's said it has a plan to gain and retain more customers under 40 years old, where it knows it still has work to do.

Shoppers under 40 have told Macy's that the retailer's private brands "are too old for her," said Patti Ongman, Macy's chief merchandising officer. She said Macy's is working on two new apparel labels to fix that.

Macy's also has plans to grow four of its strongest existing private labels, including Style & Co. and International Concepts, to $1 billion each.

Macy's shares were last up more than 3%. The stock has fallen about 35% over the past 12 months. Macy's has a market cap of about $5.2 billion.

— CNBC's Courtney Reagan contributed to this reporting.

Macy's to close 125 stores and cut 2,000 corporate jobs