WEBVTT - Miracle at Macy's 0:00:04.400 --> 0:00:07.800 For years, when someone thought of the holidays, they likely 0:00:07.840 --> 0:00:11.040 thought of Macy's. From ushering in Christmas with Santa in 0:00:11.039 --> 0:00:14.200 the holiday parades, two giant trees to department store windows, 0:00:14.240 --> 0:00:17.160 and even a miracle of a movie, this company has 0:00:17.239 --> 0:00:20.759 made Christmas and the holiday season it's business. But it 0:00:20.840 --> 0:00:24.120 hasn't been all eggnog and mistletoe for this festive department store. 0:00:24.520 --> 0:00:27.800 As in, they found themselves on the naughty list and 0:00:27.840 --> 0:00:30.880 in financial trouble. Let's grab a cup of good cheer 0:00:31.040 --> 0:00:33.760 and find out how this company fought its way back 0:00:33.800 --> 0:00:37.879 through the blizzard of bankruptcy and a changing marketplace. Like 0:00:37.960 --> 0:00:52.240 a Rudolph led sleigh, this is Macy's on the brink. Earl, 0:00:52.440 --> 0:00:54.760 you really did yourself writing that intro. This time I 0:00:54.760 --> 0:00:57.680 could tell you loved it. Jonathan. I got got a 0:00:57.720 --> 0:01:00.880 little heavy handed with the Rudolph. But today we're going 0:01:00.920 --> 0:01:05.120 to talk about Macy's and really it's funny. We were 0:01:05.160 --> 0:01:07.600 looking over this aerial while you were doing your research. 0:01:07.680 --> 0:01:11.039 You saw that Macy's actually has a lot of different 0:01:11.080 --> 0:01:14.240 moments in its history that we could define as a 0:01:14.240 --> 0:01:19.440 potential brink. Yes, we are specifically looking at a time 0:01:19.720 --> 0:01:22.119 that started kind of in the mid eighties and went 0:01:22.200 --> 0:01:25.679 into the early to mid nineties. That was the real 0:01:25.840 --> 0:01:29.920 brink that we're focusing on. But we're gonna give an 0:01:29.959 --> 0:01:32.959 overview of some other stuff with Macy's too, just because 0:01:33.319 --> 0:01:35.760 you know, it's good to have a basic understanding of 0:01:35.800 --> 0:01:38.280 the subject before you get into like and here's where 0:01:38.280 --> 0:01:41.240 it all went roll. Yeah, and I mean specifically for 0:01:41.280 --> 0:01:44.320 this story. It's actually the story of a bunch of 0:01:44.400 --> 0:01:47.120 department store conglomerates who are all kind of buying to 0:01:47.240 --> 0:01:50.760 buy the most stores to bring into their giant blob 0:01:50.880 --> 0:01:53.800 of department stores. Yeah. It's almost a I'm going to 0:01:53.880 --> 0:01:56.680 buy you before you buy me kind of story. Yes, 0:01:56.720 --> 0:01:58.600 And it's so interwoven that if you go to the 0:01:58.600 --> 0:02:01.440 Macy's website and you look their history, which of course 0:02:01.440 --> 0:02:03.840 I did, half of their history talks about like the 0:02:03.880 --> 0:02:07.240 Federated Department Stores or may Department Stores Company, which are 0:02:07.280 --> 0:02:11.079 the other two major major players in this game. We're 0:02:11.120 --> 0:02:15.000 trying to focus mainly on Macy's history, but they are 0:02:15.040 --> 0:02:18.480 a part of it. Yeah, So before any of them 0:02:18.520 --> 0:02:23.560 became a part of Macy's history, the company itself can 0:02:23.600 --> 0:02:29.160 trace its origins back to a fairly modest beginning all 0:02:29.200 --> 0:02:33.760 the way back in the nineteenth century, the eighteen hundreds, 0:02:33.919 --> 0:02:38.320 that's when you had the founder R. H. Macy. Yes, 0:02:38.400 --> 0:02:41.920 and Macy's what would become Macy's was not the first 0:02:42.200 --> 0:02:44.920 company or business they tried to open. He had tried 0:02:44.919 --> 0:02:48.880 to open a series of dry goods retail establishments. Yes, 0:02:48.919 --> 0:02:51.680 and I think also possibly like a sewing store or 0:02:51.680 --> 0:02:56.040 something like that. Yeah, but um, they didn't work so good. 0:02:56.639 --> 0:03:00.480 A lot of his businesses went belly up, much like whales. 0:03:00.639 --> 0:03:03.000 He used to hunt because he was a whaler and 0:03:03.040 --> 0:03:04.920 he was also heard of the gold Rush, so he 0:03:05.000 --> 0:03:08.480 was a prospector and a whaler. And then he starts 0:03:08.480 --> 0:03:12.920 opening up dry goods stores in New York. So really 0:03:13.040 --> 0:03:17.400 we're looking at New York City eighteen fifty eight and 0:03:17.680 --> 0:03:20.880 the event that would lead into the opening of the 0:03:20.919 --> 0:03:25.120 first Macy's. So this was a little bitty dry goods 0:03:25.120 --> 0:03:29.240 store and it actually started in have Her Hill one 0:03:29.400 --> 0:03:33.960 and then it went okay but not great. Yeah, it 0:03:34.040 --> 0:03:36.120 was it was the one that went okay instead of bad. 0:03:36.400 --> 0:03:39.080 So then he said, I'm gonna go to New York 0:03:39.120 --> 0:03:41.560 City and I'm going to open this big, fancy department 0:03:41.680 --> 0:03:44.600 dry goods store. Yeah, it's New York City, where folks 0:03:44.640 --> 0:03:46.800 know what dry goods stores are supposed to be. Like, 0:03:47.280 --> 0:03:51.000 he opened up R. H. Macy and Company, and Uh, 0:03:51.600 --> 0:03:54.160 just looking over the history, one of the history points 0:03:54.240 --> 0:03:56.240 that I I thought was funny is that on the very 0:03:56.280 --> 0:03:59.440 first day of sales, the company made a whopping eleven 0:03:59.480 --> 0:04:03.600 dollars six cents. So that was just the first day. However, 0:04:03.680 --> 0:04:07.200 the first year was a different story. Things went pretty well. Yeah, 0:04:07.280 --> 0:04:13.000 they made eight five th dollars. They spent that on marketing. Uh, 0:04:13.040 --> 0:04:16.960 and then they expanded their store into eleven adjacent buildings 0:04:17.560 --> 0:04:21.200 and also expanded out from dry goods and they became 0:04:21.400 --> 0:04:24.320 one of the first department stores. Yeah. So this is 0:04:24.560 --> 0:04:28.640 a special time in American history that that transition from 0:04:28.920 --> 0:04:32.640 the local dry goods store into the larger department store, 0:04:32.680 --> 0:04:36.560 which was kind of the evolution of that type of retail. 0:04:37.279 --> 0:04:40.719 And Macy's would end up being a pioneer in many 0:04:40.720 --> 0:04:45.919 ways beyond this large expansion into eleven buildings. Yeah, he 0:04:46.160 --> 0:04:49.120 instituted a lot of firsts into his company that other 0:04:49.160 --> 0:04:53.320 companies use nowadays. So he was the first institute one price. 0:04:53.600 --> 0:04:56.320 Prior to this time, most stores you'd go in and 0:04:56.360 --> 0:04:59.560 you taggle and he put the prices, those single prices 0:04:59.720 --> 0:05:02.360 in his paper ads so that people could say, Oh, 0:05:02.440 --> 0:05:04.000 this is how much money I need to save to 0:05:04.000 --> 0:05:06.559 go buy this item that I want to buy. They also, 0:05:06.880 --> 0:05:09.799 for a long time only did cash buying and purchasing, 0:05:09.880 --> 0:05:13.760 both on a store level and on a customer level. Nah, 0:05:13.920 --> 0:05:17.200 so they wouldn't do credit at least at first, not 0:05:17.200 --> 0:05:20.960 not for many many years. Uh, they gave money back guarantees. 0:05:21.640 --> 0:05:26.559 And another big, big first, he was the first to 0:05:26.560 --> 0:05:31.240 promote a woman to executive levels. So Margaret Getchell became 0:05:31.279 --> 0:05:34.000 the store superintendent for Macy's. And a little bit more 0:05:34.040 --> 0:05:37.080 about Getchell. She's very very important in the history of 0:05:37.120 --> 0:05:40.000 Macy's for multiple reasons. First of all, she gets a 0:05:40.000 --> 0:05:43.719 lot of credit for helping the store succeed. She was 0:05:43.800 --> 0:05:47.600 there to originally be a cashier and do some bookkeeping, 0:05:48.000 --> 0:05:51.640 but she was also a very savvy businesswoman, and she 0:05:51.760 --> 0:05:56.359 helped make decisions, including marketing decisions that guided the store 0:05:56.480 --> 0:06:00.320 to those early successes. And so a lot of different 0:06:00.400 --> 0:06:05.160 sources talk about Getchell being an instrumental figure in the 0:06:05.200 --> 0:06:08.919 early days of Macy's. She was also distantly related to 0:06:09.000 --> 0:06:12.599 macy She was essentially a cousin to him. And also 0:06:12.640 --> 0:06:16.080 she had lost an eye, so she was a one woman. Yeah, 0:06:16.120 --> 0:06:19.640 she had been a teacher, but she apparently agreed to 0:06:19.760 --> 0:06:22.960 go and work for macy because she figured it would 0:06:23.000 --> 0:06:27.039 put less strain on her one remaining eye. And she 0:06:27.279 --> 0:06:30.760 also is the one who convinced Macy to adopt the 0:06:30.839 --> 0:06:32.960 logo for the store, which is a star logo. And 0:06:33.000 --> 0:06:36.279 where did the star logo come from? Ariel Christmas time? No, 0:06:36.320 --> 0:06:38.160 it did not, you know where it came from. I know. 0:06:38.520 --> 0:06:41.279 It's actually a tattoo he had on his arm back 0:06:41.320 --> 0:06:43.400 from when he was a whaler. It was like the 0:06:43.440 --> 0:06:46.280 star that guided him home. Yeah, so it's I just 0:06:46.320 --> 0:06:49.240 like the thought that one of the famous logos from 0:06:49.440 --> 0:06:53.279 retail history has its history itself tied into a tattoo. Well, 0:06:53.279 --> 0:06:55.800 since you stomped on my holiday cheer just a second ago, 0:06:55.960 --> 0:06:57.760 even though it was wrong, m I'm going to bring 0:06:57.839 --> 0:07:00.000 it back. Some other first that Macy's had. They were 0:07:00.120 --> 0:07:03.279 the first to feature Santa Claus Santa Claus statue in 0:07:03.320 --> 0:07:06.279 eighteen sixty two, and they were the first to have 0:07:06.320 --> 0:07:08.880 the big old fancy window displays in eighteen sixty four. 0:07:08.960 --> 0:07:11.080 And they were the first retailer to get a liquor 0:07:11.080 --> 0:07:13.520 license in New York City after the prohibition. But they 0:07:13.520 --> 0:07:15.760 were also the first one to get a liquor license 0:07:15.800 --> 0:07:19.040 in New York City at all from retailers. So if 0:07:19.040 --> 0:07:23.680 you look at the retail store liquor licenses, Macy's is 0:07:23.800 --> 0:07:27.560 number one. They number their liquor license. Macy's was the 0:07:27.600 --> 0:07:30.320 first retailer to get a liquor license in the city 0:07:30.400 --> 0:07:33.240 of New York. They used to sell wine and liquor. 0:07:33.280 --> 0:07:36.560 We'll talk a little bit about that in just a second. 0:07:36.680 --> 0:07:41.119 But then they also set some firsts that I'm sure 0:07:41.200 --> 0:07:46.160 thrilled customers and filled employees with dread. Yes, in eighteen 0:07:46.240 --> 0:07:48.440 sixty seven, they became the first store to stay open 0:07:48.480 --> 0:07:51.680 until midnight on Christmas Eve. So when you realize, oh no, 0:07:51.840 --> 0:07:54.040 I forgot to buy a gift for the wife, you 0:07:54.080 --> 0:07:56.280 could go to macy So if you're driving to Macy's 0:07:56.320 --> 0:07:58.720 on Christmas Eve at midnight, right now, we're with you. 0:07:59.480 --> 0:08:03.000 In eight seventy they hit a million dollars in sales. 0:08:03.040 --> 0:08:07.120 That's that's a good annual sales figure for eighteen seventies, Yes, 0:08:07.200 --> 0:08:10.360 it is. And in eighteen seventies seven R. H. Macy 0:08:10.400 --> 0:08:13.640 passed away, he handed the store over to able To 0:08:13.760 --> 0:08:16.360 la Forge and Robert M. Valentine, who are partners and 0:08:16.400 --> 0:08:19.360 also extended family, and they took over Macy's. Did have 0:08:19.360 --> 0:08:23.280 a son, but he didn't have any interest in continue business. Yeah. 0:08:23.480 --> 0:08:28.120 So LaForge was Margaret Gretchel's husband. He had started as 0:08:28.160 --> 0:08:32.080 a buyer for Macy's and she married him, so he 0:08:32.280 --> 0:08:34.800 was that since a part of the extended family. He 0:08:34.800 --> 0:08:37.360 would pass away in eighteen seventy eight, just a year 0:08:37.360 --> 0:08:41.199 after Macy did. He had tuberculosis. Gretchel would follow in 0:08:41.360 --> 0:08:46.000 eighteen eighty out of from heart congestion mainly, but Valentine 0:08:46.000 --> 0:08:49.440 would oversee the store at least until eighteen nine five. 0:08:49.600 --> 0:08:52.400 And that's when a different family would step in. Yes, 0:08:52.480 --> 0:08:56.200 the Stress Brothers is a door in Nathan and their dad. Uh. 0:08:56.240 --> 0:08:59.240 They had been leasing the basement of Macy's already. They 0:08:59.280 --> 0:09:01.839 had been bringing a lot of success to the store themselves, 0:09:02.360 --> 0:09:04.160 and they were also the ones who created the China 0:09:04.200 --> 0:09:07.240 department for Macy's. Yeah, so they already had a stake 0:09:07.360 --> 0:09:10.400 in the store at this point. Now they did a 0:09:10.480 --> 0:09:14.800 first they started the odd price policy quote unquote, yeah, 0:09:14.840 --> 0:09:19.120 you walk in, Hey, that door knobs dollars. That's strange. No, 0:09:19.600 --> 0:09:21.760 it means that instead of having a four dollar item, 0:09:21.800 --> 0:09:25.040 you're gonna have a three dollar nine cent item, so 0:09:25.080 --> 0:09:27.240 that if you buy multiple items, like if you say, 0:09:27.240 --> 0:09:31.080 buy five towels for now, you save five cents. Yeah, 0:09:31.120 --> 0:09:33.520 this is one of those things that that is a 0:09:33.559 --> 0:09:37.920 psychological tool. And it's funny because we now see it 0:09:37.960 --> 0:09:40.160 all the time, right, this is you see ninety nine 0:09:41.559 --> 0:09:45.040 and it plays that little bit of a psychological trick 0:09:45.080 --> 0:09:47.520 on us as well, because you sit there and think, oh, 0:09:47.840 --> 0:09:51.000 that's less than the next number up, and you feel 0:09:51.160 --> 0:09:54.480 like you're saving at that moment. Now to me, it 0:09:54.520 --> 0:09:56.960 seems like that would make a bigger difference back then, 0:09:57.640 --> 0:10:01.559 because a penny went a lot further. They then moved 0:10:01.679 --> 0:10:04.920 the store in nineteen o two. It had outgrown it's 0:10:05.160 --> 0:10:08.959 eleven building, large area, and they moved to thirty four 0:10:09.160 --> 0:10:12.959 and Broadway right. And then, sorry, I was just taken 0:10:13.040 --> 0:10:14.920 back by how you said that it was beautiful. I 0:10:14.960 --> 0:10:17.559 was having a producer's moment, and that was that was 0:10:17.600 --> 0:10:20.520 a big building, nine story building, so very tall building. 0:10:20.520 --> 0:10:23.600 It's not as tall as what Macy's would later inhabit, 0:10:23.720 --> 0:10:28.040 but yes, and according to your research. If you were 0:10:28.080 --> 0:10:29.880 to go to that building, you would see some of 0:10:29.920 --> 0:10:33.480 the original work still there, like some of the originals. 0:10:33.520 --> 0:10:36.280 They still have some of the wooden escalators that were 0:10:36.320 --> 0:10:40.240 from the original. In nineteen eighteen, they made thirty six 0:10:40.280 --> 0:10:43.199 million dollars in annual sales. That's a lot of money 0:10:43.200 --> 0:10:45.880 back then, a lot of money right now, Yeah, I 0:10:45.880 --> 0:10:49.000 would not turn my nose off. And then in nine 0:10:49.559 --> 0:10:54.000 two they went public and they started acquiring regional stores. 0:10:54.360 --> 0:10:56.720 So this is where we start seeing them branch out 0:10:56.800 --> 0:10:59.720 from being a New York based department store and they 0:10:59.760 --> 0:11:04.000 start creating what would eventually become a chain of stores. 0:11:04.240 --> 0:11:07.560 Nineteen twenty four we see the start of what would 0:11:07.600 --> 0:11:10.920 become an annual tradition. One of the big ones, although 0:11:10.920 --> 0:11:13.720 it was on a different date in nineteen that would 0:11:13.720 --> 0:11:16.439 be the Macy's Christmas Parade, now known as the macy 0:11:16.520 --> 0:11:19.520 Sanksgiving Day Parade. Now. I used to watch the local 0:11:19.520 --> 0:11:23.760 one in Atlanta and also the one on TV. People 0:11:23.760 --> 0:11:26.120 attended the first one and they had all of these 0:11:26.160 --> 0:11:29.120 like animals and fun thing it was. It was very 0:11:29.120 --> 0:11:31.360 different then. It was more like almost like a traveling 0:11:31.400 --> 0:11:35.040 circus type thing, and the parade was actually organized by 0:11:35.080 --> 0:11:37.880 the employees. It was wrought to life by the employees 0:11:37.880 --> 0:11:41.040 of Macy's wanted to celebrate their American heritage. Now it's 0:11:41.040 --> 0:11:45.160 a much, much, much larger production that involves people from 0:11:45.200 --> 0:11:47.839 all over the world, not just the United States. It 0:11:47.880 --> 0:11:51.000 also gets people hyped for the beginning of the shopping season. Yes, 0:11:51.640 --> 0:11:54.800 that's the biggest purpose exactly, kind of like, alright, now, 0:11:54.800 --> 0:11:58.440 everyone come inside and buy your stocking stuffers. Uh. Then 0:11:59.000 --> 0:12:02.160 one we would get some leges lation that would affect Macy's, 0:12:02.200 --> 0:12:06.280 the federal Fair Trade Law, which meant that there had 0:12:06.280 --> 0:12:10.319 to be specific minimum prices in retail for certain suppliers. 0:12:10.360 --> 0:12:13.080 And this was to help stabilize the economy during the depression. 0:12:13.160 --> 0:12:16.520 So certain retailers and certain suppliers had you keep a 0:12:16.600 --> 0:12:19.400 minimum price, Like, they couldn't go below a minimum price. 0:12:20.559 --> 0:12:23.960 You couldn't suddenly have like a price war going below 0:12:24.160 --> 0:12:27.600 a certain because the federal law mandated that they be 0:12:27.679 --> 0:12:31.719 at least this much. Yes, so Macy's couldn't be undersold. 0:12:31.800 --> 0:12:34.319 And they were such a large company that they could, 0:12:34.559 --> 0:12:38.520 much like Walmart or Target, keep that bottom price. So 0:12:38.760 --> 0:12:42.240 then you have this wonderful little note here about Fred 0:12:42.559 --> 0:12:47.280 Lazarus Junr. In nineteen thirty nine. He was the owner 0:12:47.440 --> 0:12:50.319 of Federated Department Stores. We talked about that a couple 0:12:50.280 --> 0:12:53.920 of times, the holding company that owned other department stores. 0:12:54.640 --> 0:12:58.840 He is the person who chatted with Roosevelt the President, 0:12:59.320 --> 0:13:03.360 about making just a little minor change in the calendar, 0:13:03.480 --> 0:13:07.360 because up to that point, Thanksgiving was always the last 0:13:07.720 --> 0:13:12.760 Thursday of November, and they decided that maybe we could 0:13:12.840 --> 0:13:15.720 bump that up one week to be the second to 0:13:15.800 --> 0:13:18.720 last Thursday in November because that would give us more 0:13:19.080 --> 0:13:23.760 time between Thanksgiving and Christmas to sell things. Yeah, but 0:13:23.880 --> 0:13:27.680 this change helped all the retailers. Yeah, So it wasn't 0:13:27.760 --> 0:13:31.160 just Federated Department Store saying we want to get ahead. Yeah. 0:13:31.200 --> 0:13:33.679 I mean they couldn't say, like, can you make Thanksgiving 0:13:33.679 --> 0:13:38.680 a week early but only for us? Yeah. In Macy's 0:13:38.720 --> 0:13:42.280 purchased some stores in California O'Connor, Moffit and company to 0:13:42.400 --> 0:13:47.080 expand westward, Yeah, and convert them over into Macy's department stores. 0:13:47.280 --> 0:13:50.679 And in those stores in California they did their first 0:13:50.720 --> 0:13:55.400 Macy's department store Flower Show. Now a movie comes out, 0:13:56.280 --> 0:14:01.559 and one movie came out. A specific movie came out 0:14:02.120 --> 0:14:05.160 that has to do with Macy's and you already alluded 0:14:05.240 --> 0:14:09.600 to it. Yes, yes, Virginia talk about Miracle on thirty 0:14:09.640 --> 0:14:14.040 fourth Street. Miracle on thirty fourth Street. It's about a 0:14:14.120 --> 0:14:17.679 Macy's department store, Santa. It was a little bit magical. 0:14:18.400 --> 0:14:20.720 And in the movie, he tells some customers to go 0:14:20.840 --> 0:14:22.880 for to Gimbal's because Macy's is out of stock of 0:14:22.880 --> 0:14:25.960 an item, but Gimbal's might have it, And that created 0:14:26.000 --> 0:14:29.160 such goodwill for the company of Macy's that more people 0:14:29.160 --> 0:14:32.040 wanted to shop at Macy's because they were looking out 0:14:32.080 --> 0:14:34.200 for the customer first. And that's what happened in the movie. 0:14:34.240 --> 0:14:36.480 And in the movie, Gimble and Macy become friends, even 0:14:36.480 --> 0:14:39.000 though macy was dead by that time. It was hard 0:14:39.040 --> 0:14:40.960 to be friends. I mean maybe it as a zombie, yeah, 0:14:41.000 --> 0:14:43.560 But but this whole like idea of friendship, and this 0:14:43.600 --> 0:14:48.440 whole movie helped both stores for many, many years with 0:14:48.520 --> 0:14:52.320 their holiday sales. In the nineteen fifties, Macy's would finally 0:14:52.360 --> 0:14:56.000 start issuing credit accounts, no longer taking cash only, although 0:14:56.160 --> 0:14:58.440 it would benefit you if you stuck with cash, yeah, 0:14:58.480 --> 0:15:01.000 if you charged six percent last yeah. And then nineteen 0:15:01.040 --> 0:15:03.920 fifty two they hit a little bit of a snag 0:15:04.080 --> 0:15:08.640 because that was when the federal fair trade law was overturned. Yes, 0:15:08.960 --> 0:15:13.040 so now it was fair game for undercutting prices. There 0:15:13.120 --> 0:15:16.640 wasn't price fixing to keep Macie's safe in the market, 0:15:17.000 --> 0:15:19.360 and so they had to of course compete with all 0:15:19.360 --> 0:15:22.400 these people who could have lower prices, and they posted 0:15:22.400 --> 0:15:27.320 their very first loss that year. Now they had a subsidiary, Bamburgers, 0:15:27.480 --> 0:15:30.240 who instead of like trying to cut and buy cheaper 0:15:30.280 --> 0:15:32.920 things and lower prices, bought a bunch of top the 0:15:33.000 --> 0:15:36.240 line goods and made all these lavish displays, and people 0:15:36.280 --> 0:15:38.720 really liked it as kind of a specialty store. So 0:15:39.000 --> 0:15:42.160 Macy's actually made a good bit of money from them. Interesting, 0:15:42.200 --> 0:15:45.520 So yeah, almost going the opposite direction there. But they 0:15:45.640 --> 0:15:49.640 also started looking at some of their departments that weren't 0:15:50.000 --> 0:15:53.400 being particularly productive. They were kind of being seen as 0:15:53.440 --> 0:15:55.960 a drain on resources, so they started consolidating and getting 0:15:56.040 --> 0:15:58.720 rid of departments. Yes, okay, so in nineteen seventy six 0:15:58.720 --> 0:16:00.960 they got the seller. It was literally the bargain basement 0:16:00.960 --> 0:16:02.600 of Macy's. So this is where people could go and 0:16:02.640 --> 0:16:06.720 buy super discounted items or last run items, things like that. 0:16:06.960 --> 0:16:10.760 And then in seventy nine, they axed their liquor and 0:16:10.760 --> 0:16:13.640 wine department that we talked about earlier, but this was 0:16:13.680 --> 0:16:15.920 apparently something that had been going on in New York 0:16:15.920 --> 0:16:18.680 City for a while. Other retailers, we're getting out of that. 0:16:19.000 --> 0:16:22.200 According to Macy's, it was because men's were needed more space. 0:16:22.280 --> 0:16:27.640 Maybe men were putting on more weight or more close yet, 0:16:27.640 --> 0:16:30.640 maybe they were cold. But the scuttle butt was that 0:16:30.760 --> 0:16:34.160 the department had actually been unprofitable for twenty years, and 0:16:34.200 --> 0:16:36.840 so they finally pulled the plug on it. And then 0:16:36.840 --> 0:16:39.480 in the nineteen eighties, and we're finally getting to the 0:16:39.520 --> 0:16:43.640 brain here, they started opening up specialty stores. In nineteen two, 0:16:43.680 --> 0:16:47.640 Macy's taught the industry in profit per square foot, and 0:16:47.680 --> 0:16:51.280 in eighty four they hit over four billion dollars. But 0:16:51.880 --> 0:16:54.240 while four billion dollars in eighty four is a huge 0:16:54.240 --> 0:16:56.840 amount of money, they were right around the corner from 0:16:56.920 --> 0:17:01.160 hitting a really rough time. And we'll plane exactly what 0:17:01.240 --> 0:17:14.600 happened in just a moment. All right, So eighty four 0:17:14.800 --> 0:17:19.320 Macy's has a banner making year, right, they make four 0:17:19.400 --> 0:17:25.440 billion dollars in sales. But the hits and the economy 0:17:25.480 --> 0:17:27.919 starts to slow down, and as a result, people have 0:17:28.040 --> 0:17:32.280 less money to spend on shopping and fewer people are 0:17:32.320 --> 0:17:35.200 coming in and buying stuff at Macy's, which means Macy's 0:17:35.200 --> 0:17:38.680 sales slowed down. So now they're finding themselves with too 0:17:38.720 --> 0:17:42.120 much inventory and they had to keep dropping their prices 0:17:42.359 --> 0:17:45.760 in order to just move product. And they still did 0:17:45.840 --> 0:17:48.280 okay in eighty five, but it was a drop in 0:17:48.320 --> 0:17:51.240 their trend and it was causing a drop in their stocks. 0:17:51.280 --> 0:17:55.280 And this made executives at Macy's worried that federated department 0:17:55.320 --> 0:17:57.480 stores are made. Department store company was going to come 0:17:57.480 --> 0:18:00.560 in and try to take them over, because now they 0:18:00.640 --> 0:18:02.879 might be showing a week. Yeah, so some of the 0:18:02.920 --> 0:18:07.000 executives are bailing out. The stock prices starting to drop. 0:18:07.080 --> 0:18:08.760 This is one of the issues of being a publicly 0:18:08.800 --> 0:18:11.320 traded company, obviously, is that you have shareholders to answer to. 0:18:12.000 --> 0:18:15.960 So one solution to this problem is, well, what if 0:18:16.000 --> 0:18:19.480 we just buy up all the shares of stock and 0:18:19.640 --> 0:18:24.080 turn the company private again. So Ed Finkelstein, the president 0:18:24.160 --> 0:18:27.359 of the flagship store, led a buyout with all the 0:18:27.359 --> 0:18:30.040 other executives or a lot of the other executives. They 0:18:30.080 --> 0:18:33.960 bought Macy's for seventy dollars a share and at Finkelstein 0:18:34.000 --> 0:18:38.920 became the CEO. Yeah, this was largely to protect Macy's 0:18:39.000 --> 0:18:42.399 from being taken over by one of the competitors. The 0:18:42.480 --> 0:18:44.879 nineteen eighties was an era. We've talked about this, I 0:18:44.920 --> 0:18:47.200 think a couple of times on the brink. The nineteen 0:18:47.240 --> 0:18:50.639 eighties was an era where the hostile takeover and the 0:18:50.760 --> 0:18:56.159 leveraged buyout where both frequently used tools where companies would 0:18:56.359 --> 0:19:00.040 swoop in and take over another company without their it's it. 0:19:00.160 --> 0:19:03.199 So instead of acquiring or merging with a company, you 0:19:03.280 --> 0:19:06.200 just go in and throw a stock maneuver, you take 0:19:06.440 --> 0:19:09.399 over another company. And they were worried about that. And 0:19:09.440 --> 0:19:12.520 this was the biggest takeover of a retailer at that time. 0:19:12.880 --> 0:19:16.159 So at that point, things at least at first looked 0:19:16.200 --> 0:19:18.520 like they might actually be on the up and up. 0:19:18.600 --> 0:19:21.679 They almost made profit over the debt they incurred from 0:19:21.720 --> 0:19:25.280 the buyout, which is no small matter. I mean, we've 0:19:25.320 --> 0:19:28.280 seen acquisitions. In fact, we'll talk about a couple that 0:19:28.520 --> 0:19:31.800 ended up accruing so much debt that companies were never 0:19:31.840 --> 0:19:34.040 able to recover from. Yeah. In fact, we'll talk about 0:19:34.040 --> 0:19:37.000 it now because in Macy's bought some of the federated 0:19:37.080 --> 0:19:39.920 stores in an attempt to start taking them over because Okay, 0:19:40.000 --> 0:19:42.280 we're doing good. This was this was a good move. 0:19:42.600 --> 0:19:45.240 They bought Bullocks and Bullocks will Shires and it costs 0:19:45.240 --> 0:19:48.159 them a billion dollars and it tipped the debt scales 0:19:48.240 --> 0:19:50.800 against them, and so you've got that, and you've got 0:19:50.800 --> 0:19:55.640 the recession, and the holiday sales are down, profits are down, 0:19:56.920 --> 0:20:00.080 which is really tough because Macy's makes like of their 0:20:00.080 --> 0:20:03.240 annual revenue off of holiday sales. So now they're having 0:20:03.280 --> 0:20:06.600 to drop prices again and they're getting overstocked again. So 0:20:06.640 --> 0:20:09.000 they're going back to that same problem that led all 0:20:09.040 --> 0:20:11.800 of the executives to buy Macy's, which led to this 0:20:11.840 --> 0:20:14.879 whole snowball. It's just it's this circular issue I was 0:20:14.920 --> 0:20:18.680 feeding on itself. And then they tried to buy back 0:20:18.880 --> 0:20:22.600 three hundred million dollars in bonds at half value to 0:20:22.720 --> 0:20:25.920 help alleviate some of their debt, and they announced that 0:20:25.920 --> 0:20:28.080 they're going to stop paying back their suppliers for the 0:20:28.119 --> 0:20:32.120 indefinite future. Yeah, that's never a great sign now, and 0:20:32.160 --> 0:20:35.440 then they had more bad holiday sales. So this leads 0:20:35.480 --> 0:20:40.400 into January when it is no longer avoidable Macy's files 0:20:40.520 --> 0:20:44.600 for bankruptcy protection under Chapter eleven. Their creditors were in 0:20:44.680 --> 0:20:47.120 need of their money, they were not able to pay 0:20:47.160 --> 0:20:50.080 their suppliers, they were not doing well in sales, and 0:20:50.119 --> 0:20:52.760 this was, you know, kind of that hail Mary passed 0:20:52.880 --> 0:20:57.400 to try and stay solvent long enough to to recover. Yes, 0:20:57.480 --> 0:21:00.680 and in April of that year at Finkelstein steps out 0:21:00.680 --> 0:21:04.560 as CEO and Myron E. Olman and Mark S. Handler 0:21:04.720 --> 0:21:07.440 step in. They had a five year plan to turn 0:21:07.440 --> 0:21:10.640 around and reorganize the company instead of a whole bunch 0:21:10.640 --> 0:21:12.960 of layoffs. Some of their big ideas where to cut 0:21:13.000 --> 0:21:15.760 the marketing budget and have less one day sales and 0:21:15.800 --> 0:21:19.560 have better customer service, and put in a computerized system 0:21:19.600 --> 0:21:23.320 so they don't have so much overstock and inventory. And 0:21:23.359 --> 0:21:26.760 then happy holiday miracle, they have a better than expected 0:21:26.760 --> 0:21:30.680 holiday season. Also in that same year, Federated Department Stores 0:21:30.720 --> 0:21:34.800 would emerge from bankruptcy. Campo had ceased to exist, so 0:21:34.880 --> 0:21:38.520 Federated had re emerged as a public company that will 0:21:38.560 --> 0:21:41.800 become important again in just a moment. Back on Macy's side, 0:21:41.800 --> 0:21:45.359 in three they had closed sixty six on profitable stores 0:21:45.880 --> 0:21:48.080 in an effort to get rid of things that were 0:21:48.119 --> 0:21:50.560 losing the money and open things that would make them money. Yes, 0:21:50.600 --> 0:21:52.920 so they open up news stores too, but these were 0:21:52.920 --> 0:21:55.040 in areas where they projected that they would be able 0:21:55.040 --> 0:21:59.760 to make a profit. Yes. Then Federated Department Stores, two 0:22:00.080 --> 0:22:04.520 years out of bankruptcy, comes up and acquires Macy's. The 0:22:04.600 --> 0:22:07.560 event that was feared back in the eighties has come 0:22:07.600 --> 0:22:10.480 to pass. Yes. Well, I mean they did kind of 0:22:10.520 --> 0:22:13.520 ask for it because shortly after Macy's had their buy out, 0:22:13.560 --> 0:22:17.840 they bought some of Federated. The tides have turned. Yes, 0:22:18.200 --> 0:22:23.320 so Federated comes in and they acquire Macy's. This makes 0:22:23.359 --> 0:22:28.600 Federated a true giant in the department store industry. Yes, 0:22:28.680 --> 0:22:30.960 that gives them more than four hundred department stores in 0:22:31.000 --> 0:22:35.000 thirty seven different states. And they are acquiring of Macy's. 0:22:35.080 --> 0:22:37.600 Had to be approved by the US bankruptcy court because 0:22:37.600 --> 0:22:39.639 this makes them such a large company. Yeah. This was 0:22:39.680 --> 0:22:42.399 one of those moves where a company has to pass 0:22:42.560 --> 0:22:46.440 government approval in order to actually go forward with a plan, 0:22:46.680 --> 0:22:49.560 because it's a possibility that the government would say no, 0:22:49.640 --> 0:22:53.000 this constitutes a monopoly and therefore it's anti competitive. Yes, 0:22:53.200 --> 0:22:56.119 but you know, Federated isn't trying to wipe out Macy's. 0:22:56.440 --> 0:22:58.840 Macy's has got a good name for itself. They're just 0:22:59.000 --> 0:23:02.240 trying to make one of us well. And also Macy's 0:23:02.280 --> 0:23:06.240 was in danger of not being anything anymore. Yeah, so 0:23:06.359 --> 0:23:09.320 they acquired it, and then they emerged Macy's in their 0:23:09.400 --> 0:23:12.000