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Cowen's Chen: We Are Seeing the Modernization of Macy's (Audio) · Bloomberg Intelligence

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  Speaker 1: internet e commerce, online shopping. How can you profit from it? Well,
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  Speaker 1: let's find out. Returning now to our own Katherine Cowry
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  Speaker 1: for today's et F report, Globally, retail sales are expected
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  Speaker 1: to store past the one and a half trillion dollar
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  Speaker 1: marked by that's according to Statista. And yes, there is
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  Speaker 1: an et F aimed at tapping into that growth. It's
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  Speaker 1: the Amplify Online Retail et F. Taker I b U
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  Speaker 1: y or I buy. Christian Magoon, chief executive of Amplify Investments,
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  Speaker 1: on why his firm decided to launch the e t
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  Speaker 1: F this year. Even though a lot of people are
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  Speaker 1: familiar with online retail sales, it's only seven and a
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  Speaker 1: half percent of US total total US retail sales, so
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  Speaker 1: we think they're um this this has room to maybe
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  Speaker 1: double or triple over the next four or five years,
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  Speaker 1: and we've seen research that supports that. Magoon says, there
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  Speaker 1: are three types of companies in the e t F.
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  Speaker 1: The largest allocation is traditional retailers. It's about six of
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  Speaker 1: the e t F. And these are companies like pet
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  Speaker 1: meds UM, companies like Lands and that are doing again
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  Speaker 1: seventy or more of their sales from through an online channel.
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  Speaker 1: I buy has two point seven million dollars in assets
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  Speaker 1: under management and an expense ratio of sixty five basis points.
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  Speaker 1: That's your Bloomberg ETF report. I'm Katherine Cowdery. This is
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  Speaker 1: taking stock with Kathleen Hayes and Prim Fox on Bloomberg
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  Speaker 1: Radio The world of retail. Taking a look at Macy's today.
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  Speaker 1: The shares are higher by more than seventeen per cent.
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  Speaker 1: Why while the company announces that it will shut her
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  Speaker 1: more than one stores that's about fiftent of its base
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  Speaker 1: and cut jobs in order to combat sluggish traffic as
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  Speaker 1: well as discounters. Here to tell us more is Oliver
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  Speaker 1: chen he Is, managing director and senior retail analystics Kalin
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  Speaker 1: and Company. Oliver, thank you for being with us. Tell
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  Speaker 1: us about Macy's and their plan to fix what is
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  Speaker 1: a struggling retail empire. Yeah, what happened today in Macy's
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  Speaker 1: where the comp store sales were better than feared, so
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  Speaker 1: they came out still negative negative two point six, but
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  Speaker 1: Street was looking at a negative four point seven, so
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  Speaker 1: better than feared combined with very low bar in terms
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  Speaker 1: of the sentiment into the print. So what's happening in
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  Speaker 1: retail right now and them there is a bit of
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  Speaker 1: a retail revolution because quite simply, the customers have been
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  Speaker 1: moving faster than retailers and what customers want and the
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  Speaker 1: biggest problem is just getting people to walk into stores.
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  Speaker 1: There are so many distractions, there's it's so much easier
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  Speaker 1: to shop online now and people have stores on the
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  Speaker 1: palm of their hands, so there's a new bar in
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  Speaker 1: terms of interesting people in terms of just walking in
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  Speaker 1: the store. So the store traffic is a big problem.
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  Speaker 1: And closing one stores was applauded by the Street because
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  Speaker 1: that's part of the process as Macy's really tries to
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  Speaker 1: focus focus as well as get closed stores which make
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  Speaker 1: less sense to them in terms of sales productivity. Um,
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  Speaker 1: so we're really seeing a modernization of Macy's on many levels.
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  Speaker 1: So Oliver, what will Macy's look like then? Is this
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  Speaker 1: the end of you know, the big department stores. We
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  Speaker 1: know it. We know that. Going the other direction, there's
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  Speaker 1: been companies like Warby Parkers started out online and they're
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  Speaker 1: opening brick, brick and mortar after brick and mortar after
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  Speaker 1: brick and mortar. Yeah, Kathleen, I think it's it's really interesting.
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  Speaker 1: I mean, our view here at Cowen is the future
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  Speaker 1: is bricks plus clicks. So we even see concepts like
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  Speaker 1: Warby Parker, you know, open stores and really try to
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  Speaker 1: embrace the customer. Macy still has a really compelling assortment.
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  Speaker 1: You really need to touch and feel and get get
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  Speaker 1: into the store to understand fashion, and that's a key point.
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  Speaker 1: But we have to see Macy's really excite millennials and
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  Speaker 1: Generation Z folks who are really interested in looking at
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  Speaker 1: Instagram feeds and traveling and experiencing great things that they
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  Speaker 1: can brag about online. So Macy's needs to reinvent itself
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  Speaker 1: and become a cool, exciting cultural institution again. And that's
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  Speaker 1: going to require change. Change with product assortment, change with service,
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  Speaker 1: and change with how customers interact with the store. Shoppers
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  Speaker 1: are selfish, We're selfish with their time, and we're looking
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  Speaker 1: for value, value as it applies to your time as well. Oliver,
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  Speaker 1: I wonder if you could comment about the competition coming
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  Speaker 1: from stores such as Zara, h and m Top Shop, Unchlow,
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  Speaker 1: Forever One. They're not closing stores, are they. Yeah. What
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  Speaker 1: what we see there is a is a healthier environment
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  Speaker 1: and pm UM they have really done a great job
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  Speaker 1: the bottom line on a lot of the fast fashionist speed.
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  Speaker 1: So we're moving towards this, this generation of continuous shopping,
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  Speaker 1: seasonless shopping. You know, I want what I want when
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  Speaker 1: I want it, So you're walking into store and you're
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  Speaker 1: seeing collections online and you really want that now. And
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  Speaker 1: a lot of those concepts have executed that extremely well
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  Speaker 1: with great supply chains. So it's up to retailers like
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  Speaker 1: Macy's to to really face that in the form of
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  Speaker 1: assortment and speed um and and we're seeing, you know,
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  Speaker 1: strength with that because those fast fashion competitors you named
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  Speaker 1: offer good speed, good prices, and customers do not want
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  Speaker 1: to wear One brand had to tell they're really not
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  Speaker 1: shopping that where anymore. So contrast Macy's two Coals very
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  Speaker 1: different response today. Yeah, you know Coals was also it
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  Speaker 1: was an inline camp and they guided EPs down so
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  Speaker 1: it was all a little better than feared story a
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  Speaker 1: little bit different. They don't have as an aggressive as
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  Speaker 1: a store a closure plan right now, and it's also
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  Speaker 1: going through transformations with with the brand portfolio. But we
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  Speaker 1: still saw some nice stock upside at Coals as well
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  Speaker 1: and Um. You know, overall today this better than feared
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  Speaker 1: scenario which played out has benefited both stocks. Tell us
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  Speaker 1: about Nordstrom that Northstrom perhaps is in a different category,
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  Speaker 1: perhaps more upscale. But I'm wondering if you could tell
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  Speaker 1: us about Nordstrom and it was founded as a shoe
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  Speaker 1: company and it has some of the same issues that
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  Speaker 1: you talk about with Macy's and Coals. What's different about
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  Speaker 1: north Trum and what what investors and others should realize
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  Speaker 1: is north Trum has a nice portfolio because it was
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  Speaker 1: early to online, so we have a nice attractive online
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  Speaker 1: mix of business of high teens to it has Northstrom Rack,
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  Speaker 1: which is of the business, and then it has the
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  Speaker 1: full line. So we see a portfolio of concepts and
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  Speaker 1: you can trast that again against Macy's, which is really
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  Speaker 1: just starting an off price concept. And then if you
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  Speaker 1: think about retail large, you gotta remember t j X
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  Speaker 1: and Ross off price has really been in the sweet spot.
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  Speaker 1: So Nordstrom having that portfolio, combined with being a customer
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  Speaker 1: first organization, very focused on what customers want, even at
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  Speaker 1: the expense of margins, has really helped prepare it for
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  Speaker 1: the long term. That being said, there's still problems in
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  Speaker 1: retail and we're cautious. Well, Oliver, what the heck can
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  Speaker 1: Macy's do? You just said, oh, they have to do
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  Speaker 1: these things. Okay, someone makes you the head of Macy's.
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  Speaker 1: What are you gonna do, Oliver, How are you gonna
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  Speaker 1: change Macy's to have them compete with online shopping, which
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  Speaker 1: is growing all the time. Well, they Macy's is still
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  Speaker 1: one of the biggest players in retail, but Amazon is
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  Speaker 1: a huge factor with convenience. But Macy's knows Fender as well.
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  Speaker 1: They can get exclusive product made from Macy's. They have
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  Speaker 1: a tremendous brand equity and household appreciation, and they have
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  Speaker 1: really stronger knowledgement of the situation and a very good
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  Speaker 1: management team who's rationalizing real estate. They just have to
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  Speaker 1: move fast. They have to make stores fun again. They
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  Speaker 1: have to add experiences. What I think they're doing now
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  Speaker 1: is pivoting to offer more service. So when you walk
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  Speaker 1: into Macy's. You don't really want to see messy piles
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  Speaker 1: of stuff. You want to see someone that really helps
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  Speaker 1: you navigate. You also want to have fun. You want
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  Speaker 1: to do health and wellness too, So maybe you could
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  Speaker 1: exercise in the store. You could get some health and wellness,
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  Speaker 1: um juice bar, restaurants, uh, watching an art gallery what
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  Speaker 1: I think they could expand it further. I mean, I
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  Speaker 1: think there's all these opportunities because the main issue is
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  Speaker 1: this traffic situation. So uh, they have to really offer
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  Speaker 1: the consumer kind of double duty and and refocus everybody.
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  Speaker 1: In addition to clothing, Does Terry London really have what
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  Speaker 1: it takes to turn Macy's around? I mean he goes
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  Speaker 1: all the way back to Bullocks and federated department stores.
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  Speaker 1: I mean, if you can go back to the nine
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  Speaker 1: nineties when Federated at Macy's combined, Uh, that was seen
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  Speaker 1: as a way to create a retail juggernaut. We are
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  Speaker 1: excited about management because Terry knows the organization. There's a
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  Speaker 1: new CEO coming as well, and they really understand, you know,
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  Speaker 1: how to impact the large organization and what the problems
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  Speaker 1: are now versus what the future can hold. So Macy's
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  Speaker 1: really does face challenges every every three to five years
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  Speaker 1: about reinventing itself. A setback is a set up for
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  Speaker 1: a comeback, and they've been aggressive about communication here. We
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  Speaker 1: do have a market perform rating on the stock, but
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  Speaker 1: I'm I'm cautiously optimistic about what's possible and I'm excited
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  Speaker 1: about what what can be possible. Albert Chan, that's a
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  Speaker 1: great phrase. I'm going to use that a setback is
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  Speaker 1: a set up for a comeback way and implying that
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  Speaker 1: do a lot of things in life. At Oliver Chan today,
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  Speaker 1: managing director and senior retail analysts from Cowen and Co.
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  Speaker 1: Applying it to Macy's and its management. You can follow
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  Speaker 1: Oliver at Cohen c O W E N Research. I'm
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  Speaker 1: Kathleen Hayes along with Pam Fox. This is Bloomberg. H