CNBC Exclusive: CNBC Transcript: Macy's CEO Jeff Gennette Speaks with CNBC's Courtney Reagan Today
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Macy's CEO Jeff Gennette on CNBC's "Squawk Box" (M-F, 6-9am) today, Tuesday, August 22, 2017. Following is a link to the interview on CNBC.com: https://www.cnbc.com/video/2017/08/22/hal-lawton-brings-retail-and-technology-experience-macys-ceo-jeffrey-gennette.html?play=1.
All references must be sourced to CNBC.
JOE KERNEN: LET'S GET TO COURTNEY REAGAN SHE JOINS US WITH A SPECIAL GUEST. HI, COURTNEY.
COURTNEY REAGAN: HI. GOOD MORNING TO YOU, JOE. I'M GLAD THAT YOU GOT TO US BECAUSE WE'VE GOT SOME EXCITING THINGS TO TALK ABOUT HERE. I'M WITH MACY'S CEO JEFF GENNETTE. WE'RE IN YOUR WOODBRIDGE STORE. SO LET'S KICK IT OFF WITH THE NEWS. YOU GUYS JUST HIRED HAL LAWTON. HE'S COMING FROM EBAY, GOING TO BE YOUR NEW PRESIDENT SO TAKING OVER ONE OF YOUR TITLES. AND YOU'RE REALIGNING MERCHANDISE. HOW WILL ALL OF THIS THOUGH GOING TO HELP MACYS LIFT SALES? ISN'T THAT WHAT INVESTORS REALLY WANT TO SEE HAPPEN?
JEFF GENNETTE: THANK YOU FOR HAVING ME. I THINK YESTERDAY'S ANNOUNCEMENT WAS REALLY ALL ABOUT HOW MACYS IS GOING TO GROW SALES FASTER. AND THE FIRST ANNOUNCEMENT WAS HAL LAWTON, WHO IS GOING TO BE THE NEW MACY'S PRESIDENT, AND HE'S KIND OF— YOU KNOW— HE'S A GREAT CHOICE FOR MACY'S. HE'S GOING TO BE THE INTERSECTION BETWEEN RETAIL AND TECHNOLOGY. AND WHAT HE DID— WHAT HE LEARNED IN TERMS OF HIS RETAIL EXPERIENCE, HOW HE APPLIED THAT TO A TECHNOLOGY COMPANY AND NOW COMING BACK TO A RETAILER. WE THINK HE'S GOING TO BE ABLE TO SCALE CHANGE MUCH FASTER. AND THEN WE MADE THIS OTHER ANNOUNCEMENT ABOUT MASSIVELY RESTRUCTURING OUR MERCHANDISING ORGANIZATION. WE TOOK THREE ORGANIZATIONS, WE COLLAPSED IT INTO ONE, AND PUT AN INTERNAL GREAT LEADER OF OURS JEFF CANTOR TO RUN THAT. COUPLED WITH OUR MERCHADISING CHANGE, WE REALLY FORTIFIED WHAT WE'VE BEEN WORKING ON THE PAST 18 MONTHS, WHICH IS REALLY OUR ANALYTICS AND OUR CONSUMER INSIGHTS TEAMS. WE MOVED PRICING IN THAT, SO WE BELIEVE BY THE PRICING DECISIONS THAT ARE NOW GOING TO FORTIFY INTO A SIMPLIFIED MERCHANT STRUCTURE, WE CAN GROW SALES FASTER AT BETTER MARGINS.
REAGAN: BECAUSE YOU'LL BE ABLE TO TURN INVENTORY FASTER? IS THAT PART OF IT AS WELL?
GENNETTE: THAT'S PART OF IT. AND I THINK WE OBVIOUSLY TAKE LOTS OF MARKDOWNS ON A YEARLY BASIS, AND HAVING SCIENCE REALLY INFORM THOSE DECISIONS AT A MUCH MORE ROBUST LEVEL THEN THEY ARE TODAY IS GONNA HELP US GROW FASTER, TURN INVENTORIES MORE QUICKLY, GET BETTER MARGINS, DRIVE MORE SALES.
REAGAN: YOU'VE ONLY BEEN CEO FOR FIVE MONTHS, BUT THERE HAVE BEEN A NUMBER OF CHANGES YOU'VE MADE ALREADY. YOU CHANGED THE WAY YOU SELL SHOES. IT'S NOW OPEN SELL. YOU HAVE SOME DIGITAL PRICING, SO IT CAN HELP UPDATE PRICES AND SIZES AVAILABLE MUCH FASTER. MAKING SOME CHANGES IN FINE JEWELRY, BEAUTY, BACKSTAGE. YOU'RE DOING A LOT. IS IT POSSIBLE THOUGH THAT YOU'RE PULLING THE RIGHT LEVERS AND YOU WONT GET THE CUSTOMERS TO COME BACK IN THAT YOU'VE LOST?
GENNETTE: YOU KNOW WHAT? HOW WE'RE APPROACHING GROWTH IS BUSINESS BY BUSINESS, STORE BY STORE. WE'RE IN ONE OF THOSE STORES RIGHT HERE IN WOODBRIDGE. YOU MENTIONED WOMEN'S SHOES, YOU MENTIONED FINE JEWELRY. WE HAVE OUR BIG TICKET BUSINESS, WE HAVE OUR FRAGRANCE BUSINESS. WE ARE WINNING IN CERTAIN BUSINESSES, WE'RE WINNING IN CERTAIN STORES. WE JUST HAVE TO PUT MORE OF THEM ON THE BOARD. YOU KNOW, WE HAD A SOLID SECOND QUARTER. WE HAVE A BIG HALF AHEAD OF US THAT WE HAVE TO SHOW RESULTS.
REAGAN: MACY'S COMPETES AGAINST EVERYONE – FAST FASHION PLAYERS, T.J. MAXX, AMAZON IS HUGE – IT CAN NOT BE IGNORED. NOW THEY'RE LOOKING AT DOING PRIME WARDROBE. I MEAN, MACY'S CAN'T AFFORD TO DO A PROGRAM LIKE THAT. THE PROFITABILITY, I MEAN THERE IS NONE. IT WOULD JUST ERODE MARGINS INCREDIBLY. SO HOW DOES MACYS COMPETE WITH THAT? HOW DO YOU KEEP YOUR SHOPPER FROM TURNING TO PRIME WARDROBE FOR ALL OF HER NEEDS?
REAGAN: WE TALKED ABOUT THE LAST TIME WE WERE TOGETHER SOME OF THE INITIATIVES WE ARE WORKING ON. SO ONE OF THOSE IS A NEW LOYALTY PROGRAM RIGHT AT THE HEART OF WHAT OUR CONSUMER HAS BEEN TELLING US SHE WANTS FROM US. SO WE'RE EXCITED TO LAUNCH THAT IN OCTOBER. AND WE HAD THAT BUILT INTO OUR PLANS AND WHERE WE BELIEVE WE WILL HAVE SUCCESS IN THE BACK HALF OF THIS YEAR. YOU MENTIIONED OFF PRICE. THAT'S WORKING FOR US. WE'RE GOING TO HAVE THAT IN ABOUT 50 OF OUR IN-STORE MACY'S LOCATIONS. BUT IT'S LIFTING THE ENTIRE BUILDING BY MID SINGLE DIGITS IN THOSE STORES. WE TALKED ABOUT KIND OF THE NEXT GENERATION OF STORES WHEN WE WERE TOGETHER. WOODBRIDGE IS ONE OF THOSE. WHAT I'M EXCITED ABOUT WOODBRIDGE IS THIS IS A TYPICAL STORE FOR US. THIS ISN'T A FLAGSHIP, THIS ISN'T A SUPER REGIONAL CENTER. THIS IS A TYPICAL STORE. AND THE CHANGES THAT WE HAVE MADE HERE, IN BOTH IN THE SHOPPING EXPERIENCE AS WELL AS ASSORTMENTS IS LIFTING THE BUILDING. SO WE BELIEVE WE HAVE THE RIGHT STRATEGY. WITH YESTERDAYS' ANNOUNCEMENTS, WITH THE SIMPLIFIED STRUCTURE AND THIS NEW LEADERSHIP WITH HAL, WE BELIEVE WE KNOW WILL HAVE THE TEAM TO TAKE US FORWARD FASTER.
REAGAN: MICHELLE HAS A QUESTION--
MICHELLE CARUSO-CABRERA: HEY THERE COURTNEY, GREAT QUESTIONS ON THE STRATEGY. MR. GENNETTE, THANK YOU SO MUCH FOR JOINING US. IN TERMS OF INVESTORS WHO MIGHT BE WATCHING, IS THE DIVIDEND SAFE AT THIS POINT? HOW DO YOU THINK ABOUT CASH FLOW AND RETURNING IT TO INVESTORS AT THIS POINT WHEN YOU'RE IN THE MIDDLE OF THIS TUMULTUOUS TIME?
GENNETTE: YOU KNOW, THE DIVIDEND IS SAFE. YOU KNOW, WE HAVE RAISED THAT OVER THE PAST 6 YEARS. EXPECT THAT TO BE AS IT IS TODAY.
REAGAN: SO YOU'VE DONE A LOT WITH REAL ESTATE, OR AT LEAST YOU'RE WORKING ON THE REAL ESTATE, IF I CAN JUMP IN HERE. I KNOW BROOKFIELD IS LOOKING AT 50-PLUS PROPERTIES. DO YOU HAVE ANY UPDATES TO POSSIBLY REDEVELOPMENTS? I KNOW INVESTORS, TO MICHELLE'S QUESTION, ARE GETTING A LITTLE ANXIOUS ABOUT WHAT ELSE THEY CAN EXPECT FROM MACYS, AS THE SHARE PRICE FALLS – IN FAIRNESS.
GENNETTE: WE HAVE A GOOD STRATEGY IN REAL ESTATE AND BROOKFIELD IS ONE OF THOSE. SO EXPECT US TO MAKE PROGRESS ON THAT. WE EXPECT OF THE 50 PROPERTIES THERE WILL BE A GOOD SHARE WE WILL DEVELOP, AND MORE WILL COME ON THAT ANNOUNCEMENT IN THE FUTURE. WE ALSO WILL CONTINUE WITH LOOKING AT SINGLE ASSETS. WE MADE THE DECISION IN AUGUST OF 2016 THAT WE WERE GOING TO CLOSE 100 DOORS – WE STILL HAVE 30 DOORS OF THAT LIST THAT WE WILL. AND THEN WE HAVE DOORS LIKE IN CHICAGO, STATE STREET STORE, SOME OF OUR FLAGSHIPS, THAT WE ARE CONTINUING TO MONETIZE. AND THEN THE BIG ONE, WHICH IS HERALD SQUARE, THAT IS A BIG OPPORTUNITY FOR US. WE'RE LOOKING AT ALL POSSIBILITIES. IT'S A VERY COMPLICATED PROCESS, EXPECT US TO TAKE CARE THERE, BUT WE'RE TAKING THAT ONE VERY SERIOUSLY. WE HAVE BIG OPPORTUNITIES IN HERALD SQUARE.
REAGAN: SO YOU MENTIONED THE LOYALTY PROGRAM THAT YOU'RE GOING TO ROLLING OUT. AND I'VE GOTTA GO BACK TO AMAZON – THEY'VE GOT THE BEST LOYALTY PROGRAM IN THE WORLD, PERHAPS WITH PRIME. AND FOLKS JUST REORDER, REORDER AND THEY MAKE IT SO, SO EASY. DO YOU LOOK AT ANY MODELS, LIKE AN AMAZON PRIME. AND THAT'S WHAT CONSUMERS WANT. YOU'RE OFFERING CONVENIENCE, YOU'RE OFFERING THEM CHOICE. BUT DO YOU LOOK AT A PRIME MODEL WHEN YOU'RE TRYING TO DEVELOP A LOYALTY PROGRAM?
GENNETTE: WE DO ACTUALLY WHEN YOU THINK ABOUT IT WE HAVE A THANKS FOR SHARING PROGRAM RIGHT NOW, THAT A CUSTOMER PAYS TO GET A DISCOUNT, SO EXPECT WHAT WE'RE LAUNCHING IN THE BEGINNING OF OCTOBER WILL BASICALLY GIVE OUR BEST CUSTOMERS BETTER REWARDS THAN SHE'S EVER HAD BEFORE. AND THAT'S WHAT'S ON OUR LIST, IS THE OPPORTUNITY TO HAVE A PAY FOR PLAY PROGRAM. WE'RE NOT ANNOUNCING IT AS A YEAR-ROUND PROGRAM, BUT WE HAVE IT TODAY, WE'RE SELLING IT TODAY IN OUR STORES WITH A VERY DEDICATED CUSTOMER BASE THAT TAKES ADVANTAGE OF THAT.
REAGAN: JOE HAS A QUESTION.
KERNEN: JUST A QUICK ONE, COURTNEY. WE'VE WATCHED MACY'S MR. GENNETTE IN THE LAST COUPLE OF YEARS AND ON WAY DOWN FROM 74 TO CLOSE TO A MULTIYEAR LOW AT 19 1/2 OR SO, IF THERE WAS JUST A ONE MITIGATING -- ONE OR TWO MITIGATING FACTORS THAT THE COMPANY HAS FACED THAT IT HAD TO DEAL WITH IN THE LAST COUPLE YEARS, WOULD YOU SAY IT'S AMAZON, IS IT MALLS? WHAT EXACTLY ARE THE CHALLENGES THAT YOU'RE FACING RIGHT NOW TO RIGHT THIS SHIP IN TERMS OF THE STOCK SURPRISE?
GENNETTE: YOU KNOW, I THINK JOE, THE BEST ANSWER IS WHERE OUR CONSUMER HAS GONE. OUR CONSUMER HAS MORE CHOICES THAN EVER. SOME OF THE BRANDS THAT WE SELL HAVE MORE DISTRIBUTION THAN EVER. WHEN YOU THINK ABOUT A STORE'S EXPERIENCE, THE EXPECTATIONS OF A STORE EXPERIENCE HAS CHANGED FASTER THAN EVER. SO WE'RE FOCUSED ON THAT. WE OBVIOUSLY INVESTED EARLY IN DIGITAL, AND OUR OMNICHANNEL STRATEGIES REMAIN AS ROBUST AS EVER, BUT WE'RE NOW REALLY FOCUSED ON HOW WE TAKE ALL OF OUR DIGITAL LEARNINGS AND BRING THEM THROUGH THE ENTIRE OMNICHANNEL ECOSYSTEM, INCLUDING WHAT WE DO IN EACH AND EVERY STORE. SO WHILE WE'RE HERE TODAY IN WOODBRIDGE, IT'S REALLY HOW DO YOU SCALE THAT IN STORES ARE THE SIZE OF WOODBRIDGE, NOTS JUST IN YOUR FLAGSHIPS. SO WE'RE DEEPLY COMMITED TO MAKING THE OMNICHANNEL EXPERIENCE FRICTIONLESS. WE STILL HAVE THE ADVANTAGE OF HAVING GREAT STORES IN THE BEST MALLS IN AMERICA. WE HAVE AN AMAZING WEBSITE, MAKING THE CONNECTIONS BETWEEN THE WAY SHE SHOPS AND ALL OF THE TOUCH POINTS IS OUR JOURNEY. WE BELIEVE WE HAVE THE COMPETITIVE TOOLS WITH OUR STRATEGY AND WITH THE TALENT AND THE STRUCTURE CHANGE THAT WE MADE YESTERDAY TO ACCOMPLISH ALL OF THAT.
REAGAN: IF WE CAN WE FINISH WITH CAN FINAL—
CARUSO-CABRERA: AND DO YOU REALLY THINK YOU CAN GET BACK TO INCREASING SAME STORE SALES OVERTIME? AND IF THAT'S GOING TO BE THE CASE, IS IT INEVITABLY GOING TO BE BASED ON A MUCH, MUCH SMALLER COMPANY?
GENNETTE: MICHELLE – BUSINESS BY BUSINESS, STORE BY STORE. THAT IS GOING TO BE OUR PROGRESS. I'M VERY EXCITED ABOUT THE GREEN SHOOTS THAT WE'RE SEEING IN BOTH OF THOSE BUCKETS. EXPECT US TO CONTINUE TO PUT WINS ON THE BOARD IN THAT SUBJECT.
REAGAN: IF WE CAN FINISH WITH ONE BIG BROAD QUESTION ABOUT DEPARTMENT STORES, AT THE SAME TIME WHEN ONE OF YOUR COMPETITORS ISSUES A SUPPORT THAT'S PRETTY DIRE, ALL YOUR STOCKS FALL. DO YOU NEED TO BE IN THIS TOGETHER AND DO YOU THINK THE DEPARTMENT STORE MODEL IS VIABLE FOR THE FUTURE?
GENNETTE: I DO THINK IT IS VIABLE. WE NOW HAVE NEW ECONOMIC MODELS THROUGH LEASE OR HYBRID TO MAKE THIS AN EXCITING DESTINATION. I'M ACTUALLY ENCOURAGED BY A NUMBER OF MY COMPETITOR'S POSITIVE RESULT. I THINK IT'S THERE TO BE WON. I THINK WE HAVE A CONSUMER THAT WANTS MACY'S TO WIN AGAIN. IT'S GETTING THE RIGHT RECIPE WITH OUR STRATEGY WITH THE RIGHT TALENT TO DRIVE IT, SIMPLIFYING THE PROCESS SO WE CAN GO AS FAST AGO THE SPEED OF OUR CUSTOMER. MACY'S CAN WIN AGAIN.
REAGAN: WELL WE KNOW WE ALL WANT CHOICES, WE WANT CONVENIENCE. AND IF YOU CAN BRING THAT HOME, I THINK MACY'S HAS A GOOD FIGHTING CHANCE TO BE HERE FOR A LONG TIME. THANK YOU SO MUCH JEFF, REALLY APPRECIATE YOU BEING HERE WITH US.
GENNETTE: APPRECIATE IT.
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