Retail

Macy's CEO Jeff Gennette says the retailer will emerge from the coronavirus pandemic as a smaller company

Key Points
  • "We are going to emerge out of this as a smaller company," Chief Executive Officer Jeff Gennette said. 
  • Macy's expects to see lower volume this holiday season. 
  • The company is still considering whether or not it will close additional locations permanently. 
  • Meantime, Macy's is well into the financing process to raise debt, to come up with additional liquidity, according to its outgoing chief financial officer. 
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Macy's CEO: We will survive this, 68 stores to open May 4

Amidst all of the uncertainty that the coronavirus pandemic has raised, Macy's Chief Executive Jeff Gennette is sure of one thing: The retailer's sales will be more "modest" for some time as it emerges from this crisis. 

"We are going to emerge out of this as a smaller company," Gennette said Thursday afternoon during a virtual fireside chat with Gordon Haskett analyst Chuck Grom. "We don't really know what the ramp back looks like." 

Macy's is, meantime, already planning to see lower volume this holiday season, in part because millions of Americans are now unemployed and without paychecks. Gennette also expects its hundreds of department stores and specialty shops, including Bloomingdale's and Bluemercury, to reopen in phases. 

Macy's shares were recently down about 7%, following the conversation with Gordon Haskett's Grom. The stock has fallen more than 66% this year. Macy's has a market value of about $1.8 billion. 

Each of America's department store chains — including Macy's — has been grappling with plunging sales, as nonessential retailers' bricks-and-mortar stores were forced shut last month to try to help curb the spread of the Covid-19 virus. E-commerce revenue has not been enough to make up for losses elsewhere. 

"This is a liquidity crisis of enormous consequences," Mark Cohen, former Sears Canada CEO, recently told CNBC. 

Macy's management team on Thursday walked analysts through the retailer's plans to reopen its stores, which have been shut due to the pandemic since March 18. It will open 68 locations Monday, in states including South Carolina and Georgia, where local lockdown restrictions have been loosened. It plans to have all of its locations reopened over the next six to eight weeks, provided Covid-19 infection rates continue to taper off

It will be putting precautions in place such as limiting the number of open fitting rooms and mandating store workers wear cloth masks. "Social distancing will be the norm in all locations for the foreseeable future," it said. 

Still, shoppers likely will not be back in droves. Gennette said Macy's is forecasting a "gradual sales recovery" at its stores. 

Ahead of the virus slamming the U.S. economy and drastically changing the retail landscape, Macy's in February announced it planned to shut 125 locations over the next three years

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Simon Property Group to reopen 49 malls and shopping centers

When asked about any changes to that plan, Gennette said Thursday the company is still "debating" whether or not it will accelerate its rate of store closures. Right now, "that [125] still makes sense for us," the CEO said. 

Meantime, Chief Financial Officer Paula Price told analysts Thursday that Macy's is well into the financing process to raise debt, to come up with additional liquidity. CNBC had previously reported that Macy's was weighing raising as much as $5 billion in debt to weather the coronavirus crisis. 

"We have been engaged in this process for a while," Price said. "We have identified lead banks. ... [We're] confident we will have a deal closed and funded well in advance of when we need additional liquidity." 

Macy's strongest assets, to use as collateral to raise the debt, include its inventory and unencumbered real estate, according to Price. 

Macy's still has close to the full $1.5 billion on hand that it pulled down last month from its credit revolver, she said. The department store chain has been able to delay monthly rent payments with some of its landlords, Price added. This is just one of the measures the company has taken to preserve cash. 

The biggest U.S. mall owner, Simon Property Group, is preparing to open 49 of its malls and outlet centers, starting as soon as this Friday. Macy's has a number of stores within those malls. 

Price, notably, is set to depart Macy's effective May 31, the company previously announced. It has yet to name her replacement. 

CNBC's Lauren Hirsch contributed to this report. 

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America will emerge from coronavirus pandemic with fewer department stores