1 00:00:02,600 --> 00:00:06,320 Speaker 1: When Adrian Mitchell became Macy's chief financial officer in November 2 00:00:06,320 --> 00:00:10,719 Speaker 1: twenty twenty, he focused firmly on the company's future because 3 00:00:10,760 --> 00:00:15,720 Speaker 1: the present for department stores in general seemed bleak. Macy's 4 00:00:15,760 --> 00:00:18,000 Speaker 1: was in a position where they had really gone through 5 00:00:18,200 --> 00:00:21,680 Speaker 1: a pretty tough period, but as we approached the back 6 00:00:21,720 --> 00:00:24,000 Speaker 1: half of the question was what are we going to be? 7 00:00:24,480 --> 00:00:27,040 Speaker 1: Where are we gonna go? Adrian stepped into this role 8 00:00:27,400 --> 00:00:30,560 Speaker 1: after a period of many years of department store struggling, 9 00:00:31,080 --> 00:00:33,919 Speaker 1: and I think he moved into the seat right at 10 00:00:33,920 --> 00:00:37,400 Speaker 1: a point when investors were really questioning viability. I would 11 00:00:37,400 --> 00:00:42,040 Speaker 1: say that the depths of the negative sentiment, we're kind 12 00:00:42,040 --> 00:00:44,879 Speaker 1: of right. At the moment that Adrian stepped in, it 13 00:00:45,040 --> 00:00:48,279 Speaker 1: was student, but he left. I mean, everyone realized they 14 00:00:48,280 --> 00:00:50,959 Speaker 1: couldn't continue to operate through where they were. The primary 15 00:00:50,960 --> 00:00:56,120 Speaker 1: mission became survival. The time was right for transformation. Looking 16 00:00:56,120 --> 00:00:59,880 Speaker 1: beyond the immediate COVID crisis, Mitchell saw that the iconic 17 00:01:00,040 --> 00:01:03,600 Speaker 1: retailer needed to drive forward with a fresh approach. We 18 00:01:03,720 --> 00:01:06,880 Speaker 1: had the opportunity to really define who we are and 19 00:01:06,920 --> 00:01:09,680 Speaker 1: who we want to become, to really think about the 20 00:01:09,720 --> 00:01:12,040 Speaker 1: path to recovery and how we're going to actually do 21 00:01:12,120 --> 00:01:15,280 Speaker 1: that in a different way and really challenge ourselves on 22 00:01:15,400 --> 00:01:18,160 Speaker 1: the kinds of things that we lived with pre pandemic 23 00:01:18,400 --> 00:01:21,920 Speaker 1: as a legacy department study. That's exactly what CEO Jeff 24 00:01:21,959 --> 00:01:24,960 Speaker 1: Kinnett brought him in to achieve because he's just a 25 00:01:24,959 --> 00:01:28,920 Speaker 1: great strategist. He sees behind the corners, he sees opportunities, 26 00:01:29,160 --> 00:01:31,479 Speaker 1: and he's just been a wizard at at really looking 27 00:01:31,520 --> 00:01:34,600 Speaker 1: at our capital allocation and restoring our balance sheet and 28 00:01:34,680 --> 00:01:39,280 Speaker 1: investing in the business. Well, the automation worked pretty well. 29 00:01:39,360 --> 00:01:42,880 Speaker 1: It exceeded our expectations abou about twenty in terms of throughput, 30 00:01:43,000 --> 00:01:47,440 Speaker 1: which was very good. He's a great communicator. He's really clear, 31 00:01:47,800 --> 00:01:50,880 Speaker 1: you know, he's he's the clarity of his messaging, the 32 00:01:50,920 --> 00:01:53,400 Speaker 1: sequence of how he describes it, and that works as 33 00:01:53,400 --> 00:01:56,320 Speaker 1: well for the investor as it does for the internal colleague. 34 00:01:56,400 --> 00:01:59,480 Speaker 1: Having the right CFO was really instrumental in us making 35 00:01:59,520 --> 00:02:02,080 Speaker 1: kind of the celebrated, you know, steps that we have 36 00:02:02,200 --> 00:02:05,040 Speaker 1: made towards what we're now doing. And so there's a 37 00:02:05,080 --> 00:02:08,200 Speaker 1: new Macy's emerging and that's what we're really excited about. 38 00:02:21,360 --> 00:02:23,760 Speaker 1: It's not as if Macy's hadn't been aware of the 39 00:02:23,840 --> 00:02:27,720 Speaker 1: need for change. In February twenty the company rolled out Polaris, 40 00:02:28,040 --> 00:02:31,520 Speaker 1: a three year growth and profitability strategy. Among the goals 41 00:02:31,840 --> 00:02:35,480 Speaker 1: to reset Macy's cost base, accelerate digital growth, modernize its 42 00:02:35,480 --> 00:02:39,640 Speaker 1: supply chain, and optimize its store portfolio. And then in March, 43 00:02:40,960 --> 00:02:43,639 Speaker 1: the best laid plans of retailers across the US were 44 00:02:43,720 --> 00:02:47,520 Speaker 1: up ended by the COVID pandemic. Yes, we did introduce 45 00:02:47,560 --> 00:02:49,880 Speaker 1: Polaris at the beginning of the pandemic. We had to 46 00:02:49,960 --> 00:02:52,440 Speaker 1: kind of step back as we're going through the pandemic 47 00:02:52,520 --> 00:02:55,800 Speaker 1: and say, what's changed. How important is value? How important 48 00:02:55,880 --> 00:02:59,160 Speaker 1: is convenience. Polaris was always based on how we needed 49 00:02:59,160 --> 00:03:01,560 Speaker 1: to transform, and so we really were always going to 50 00:03:01,600 --> 00:03:04,440 Speaker 1: be digitally led. Well, we had to pivot much stronger 51 00:03:04,480 --> 00:03:07,680 Speaker 1: to digital through the pandemic, and thank goodness we did that. 52 00:03:08,480 --> 00:03:11,560 Speaker 1: Macy's digital sales as a share of revenue rose to 53 00:03:11,639 --> 00:03:14,480 Speaker 1: forty at the height of COVID spread at the end 54 00:03:14,520 --> 00:03:19,079 Speaker 1: of and while the percentage shared dropped as stores reopened. 55 00:03:19,080 --> 00:03:23,400 Speaker 1: In one, gross digital revenue in the second quarter was 56 00:03:23,480 --> 00:03:27,120 Speaker 1: up almost half from the same quarter in But a 57 00:03:27,200 --> 00:03:30,919 Speaker 1: funny thing happened while the pivot was in process. When 58 00:03:30,919 --> 00:03:35,800 Speaker 1: we went into our thesis was that digital will continue 59 00:03:35,840 --> 00:03:38,120 Speaker 1: to remain strong and stores would probably have a real 60 00:03:38,200 --> 00:03:41,960 Speaker 1: tough time. What we saw is that stores really rebounded 61 00:03:42,520 --> 00:03:45,040 Speaker 1: and digital did miss a beat. As soon as those 62 00:03:45,120 --> 00:03:48,720 Speaker 1: vaccine shots started going into people's arms, those feet started 63 00:03:48,760 --> 00:03:51,320 Speaker 1: going right back into the retail of destinations that they 64 00:03:51,400 --> 00:03:54,280 Speaker 1: knew and loved, And I think it reinforced one fact 65 00:03:54,320 --> 00:03:59,240 Speaker 1: for us about American culture that shopping is entertainment. In 66 00:04:00,040 --> 00:04:03,320 Speaker 1: the US, retail is closed over a thousand more department 67 00:04:03,360 --> 00:04:07,160 Speaker 1: stores than they opened, but those closures slow dramatically. In 68 00:04:08,000 --> 00:04:12,000 Speaker 1: one Macy still has stores slated to shutter in two 69 00:04:12,080 --> 00:04:16,120 Speaker 1: under its Polaris plan, but has said it may delay. 70 00:04:16,240 --> 00:04:19,160 Speaker 1: When you shed real state, you shed customers. You're firing 71 00:04:19,160 --> 00:04:23,080 Speaker 1: customers when you lose a store. Having stores really amplifies 72 00:04:23,120 --> 00:04:25,599 Speaker 1: what you do in digital. Having an app connects all 73 00:04:25,640 --> 00:04:28,080 Speaker 1: of it. You know, customers are doing research, they're doing 74 00:04:28,120 --> 00:04:31,160 Speaker 1: price checking, they're checking with influencers, they're putting things on 75 00:04:31,200 --> 00:04:34,200 Speaker 1: their social feeds. They're figuring out ways to be able 76 00:04:34,240 --> 00:04:37,080 Speaker 1: to use technology to understand what works for them, and 77 00:04:37,160 --> 00:04:41,040 Speaker 1: brands better be there. We continued to be very impressed 78 00:04:41,040 --> 00:04:43,800 Speaker 1: with the relevance of stores. You know, all the math 79 00:04:43,880 --> 00:04:47,480 Speaker 1: indicates that markets do best and customers are most productive 80 00:04:47,480 --> 00:04:50,080 Speaker 1: when they shop multiple channels. When we think about our 81 00:04:50,120 --> 00:04:54,440 Speaker 1: store portfolio, it's about repositioning that distribution channel. We're looking 82 00:04:54,440 --> 00:04:57,160 Speaker 1: at ways to really make our mall based stores more relevant. 83 00:04:57,279 --> 00:05:00,479 Speaker 1: A lot of that is around fulfilment services within those 84 00:05:00,480 --> 00:05:04,200 Speaker 1: bigger boxes, but the real unlock is new store growth 85 00:05:04,240 --> 00:05:06,960 Speaker 1: in this off small format. And so you think about 86 00:05:06,960 --> 00:05:10,040 Speaker 1: a thirty to fifty square foot box that historically has 87 00:05:10,080 --> 00:05:12,640 Speaker 1: been two hundred thousand square feet. Are bigger where you 88 00:05:12,640 --> 00:05:16,920 Speaker 1: have a simplified experience, high velocity, sell through great engagement, 89 00:05:17,360 --> 00:05:21,719 Speaker 1: clear sightlines across all the categories, and power centers were 90 00:05:21,760 --> 00:05:25,360 Speaker 1: in the neighborhoods in convenient locations where customers live and shop. 91 00:05:25,920 --> 00:05:28,320 Speaker 1: It's really exciting and we're in the early innings of that. 92 00:05:28,960 --> 00:05:32,080 Speaker 1: It's very clear that all retailers will have both bricks 93 00:05:32,080 --> 00:05:34,680 Speaker 1: and mortar president and e commerce presidence. Even Amazon, the 94 00:05:34,720 --> 00:05:38,159 Speaker 1: ultimate e commerce retailer, increasingly has bricks and wiltar president. 95 00:05:38,320 --> 00:05:40,839 Speaker 1: Very clear that this was what was going to happen, 96 00:05:41,279 --> 00:05:43,360 Speaker 1: and in a way we have to keep in mind 97 00:05:43,360 --> 00:05:46,200 Speaker 1: though that is a ticket to play but it's not 98 00:05:46,240 --> 00:05:49,479 Speaker 1: a ticket to win. Wool Street seems to endorse the 99 00:05:49,560 --> 00:05:53,240 Speaker 1: tach Macy's is taking. Shares have rallied since Mitchell became 100 00:05:53,320 --> 00:05:56,520 Speaker 1: CFO in November twenty and that mirror is the trend 101 00:05:56,560 --> 00:05:59,160 Speaker 1: foot department stores in general, which were one of the 102 00:05:59,240 --> 00:06:03,839 Speaker 1: highest performing groups in retail. I think that the market 103 00:06:03,880 --> 00:06:07,000 Speaker 1: got proven a bit wrong that these aren't dying in 104 00:06:07,080 --> 00:06:10,120 Speaker 1: decaying dinosaurs, right, but these actually still have a relevant 105 00:06:10,120 --> 00:06:13,359 Speaker 1: place in the broader ecosystem of retail. And to the 106 00:06:13,360 --> 00:06:17,000 Speaker 1: credit of the department stores, in particular Macy's and Coals, 107 00:06:17,440 --> 00:06:21,680 Speaker 1: they activated some really important changes in their business. The 108 00:06:21,720 --> 00:06:24,840 Speaker 1: whole notion of polarity strategy at the core, from my perspective, 109 00:06:25,279 --> 00:06:27,760 Speaker 1: is how do we unlock value for our shareholders. The 110 00:06:27,760 --> 00:06:31,559 Speaker 1: biggest thing that we had to accomplish was financial health. 111 00:06:32,120 --> 00:06:34,000 Speaker 1: You know, the economy is going to have its ups 112 00:06:34,040 --> 00:06:36,200 Speaker 1: and downs, but we needed to make sure that we 113 00:06:36,279 --> 00:06:39,560 Speaker 1: had the financial health, the strength of the balance sheet 114 00:06:39,600 --> 00:06:42,520 Speaker 1: to be able to weather that storm. And that's where 115 00:06:42,560 --> 00:06:45,359 Speaker 1: we are today and now we have capacity to return 116 00:06:45,480 --> 00:06:47,640 Speaker 1: value back to shareholders in the form of dividend and 117 00:06:47,640 --> 00:06:50,640 Speaker 1: share buybacks. How did you decide right this is the 118 00:06:50,760 --> 00:06:53,039 Speaker 1: right moment to be paying back debt. How did you 119 00:06:53,200 --> 00:06:55,719 Speaker 1: ensure that the money was there, the right opportunity, the 120 00:06:55,800 --> 00:06:58,400 Speaker 1: right financing to pay down that debt one was necessary. 121 00:06:58,480 --> 00:07:01,400 Speaker 1: There are three key steps. The first is, do we 122 00:07:01,480 --> 00:07:03,680 Speaker 1: have a strategy coming out of the pandemic going into 123 00:07:04,440 --> 00:07:06,839 Speaker 1: one that's gonna work? And so we have to listen 124 00:07:06,880 --> 00:07:09,080 Speaker 1: to the customer and make sure that we have the 125 00:07:09,160 --> 00:07:11,880 Speaker 1: right strategy. Executing the wrong strategy doesn't get you much, 126 00:07:12,200 --> 00:07:14,679 Speaker 1: so we have to execute the right strategy. The second 127 00:07:14,760 --> 00:07:18,920 Speaker 1: thing was a relentless focus on margin expansion. Whatever the 128 00:07:19,000 --> 00:07:21,560 Speaker 1: level of sales that we needed we're expected to have 129 00:07:21,720 --> 00:07:25,200 Speaker 1: in it had to come with a much more profitable 130 00:07:25,200 --> 00:07:29,320 Speaker 1: business than we had seen, certainly even pre pandemic. And 131 00:07:29,320 --> 00:07:31,240 Speaker 1: then the third thing is you got to control inventory. 132 00:07:31,640 --> 00:07:35,080 Speaker 1: You cannot be a successful retail business by having inventory 133 00:07:35,120 --> 00:07:37,640 Speaker 1: get out of control. But as we got into the 134 00:07:37,680 --> 00:07:40,080 Speaker 1: first half of one, we also had to make some bets. 135 00:07:40,640 --> 00:07:43,960 Speaker 1: We saw a demand exceeding our expectations. We also saw 136 00:07:44,000 --> 00:07:46,840 Speaker 1: COVID variants disrupting our supply chain, and we made the 137 00:07:46,880 --> 00:07:49,840 Speaker 1: bet give it to us early, and that really has 138 00:07:49,840 --> 00:07:52,320 Speaker 1: paid off for us. You know, we took all of 139 00:07:52,360 --> 00:07:55,280 Speaker 1: that cash flow we got, we restored our balance sheet, 140 00:07:55,320 --> 00:07:58,320 Speaker 1: we made further investments, and we now as a company 141 00:07:58,360 --> 00:08:00,960 Speaker 1: are stronger, you know, out of pandemic than we were 142 00:08:01,000 --> 00:08:04,480 Speaker 1: going into it. Macy's continues to hold the lead in 143 00:08:04,560 --> 00:08:08,960 Speaker 1: market share among US retailers, but Chief Future Officer Adrian 144 00:08:09,000 --> 00:08:12,520 Speaker 1: Mitchell is under no illusions the road ahead is not 145 00:08:12,720 --> 00:08:16,520 Speaker 1: going to be easy. Supply chain challenges. We believe it's 146 00:08:16,520 --> 00:08:21,560 Speaker 1: going to be prolonged into two and to labor challenges. 147 00:08:21,640 --> 00:08:24,119 Speaker 1: We have to win talent, we have to fight for talent. 148 00:08:24,160 --> 00:08:27,520 Speaker 1: We're making investments. But that's just our mindset is that's 149 00:08:27,560 --> 00:08:30,240 Speaker 1: the new normal. That's not a disruption. That's the new 150 00:08:30,280 --> 00:08:32,840 Speaker 1: normal for the near term. In the medium term, our 151 00:08:33,000 --> 00:08:37,840 Speaker 1: mindset is continuous improvement, new ways of working, fresh ideas 152 00:08:37,880 --> 00:08:41,000 Speaker 1: that are relevant for the future, and letting go of 153 00:08:41,080 --> 00:08:43,120 Speaker 1: the things that may have worked in the past but 154 00:08:43,200 --> 00:08:45,200 Speaker 1: are no longer relevant, but that we may have been 155 00:08:45,280 --> 00:08:47,640 Speaker 1: willing to live with pre pandemic, we're not willing to 156 00:08:47,679 --> 00:08:51,840 Speaker 1: live with it today. Adrian Mitchell's route to the CFO 157 00:08:51,880 --> 00:08:56,880 Speaker 1: position at Macy's had unconventional beginnings. I studied chemical engineering 158 00:08:56,920 --> 00:09:00,920 Speaker 1: at Louisiana State University, had a great experience ends and 159 00:09:01,000 --> 00:09:02,800 Speaker 1: one of the things I loved about that was just 160 00:09:03,000 --> 00:09:06,640 Speaker 1: problem solving. And what I also realized is that I 161 00:09:06,640 --> 00:09:08,800 Speaker 1: didn't want to be a chemic engineer. He took a 162 00:09:08,880 --> 00:09:11,959 Speaker 1: job at McKenzie after college, stepping away for a couple 163 00:09:11,960 --> 00:09:15,280 Speaker 1: of years to earn an MBA at Harvard. You know, 164 00:09:15,280 --> 00:09:18,839 Speaker 1: when I think about the Harvard Business School experience, what 165 00:09:18,920 --> 00:09:23,479 Speaker 1: was most impactful about that was translating the engineer engineer's 166 00:09:23,520 --> 00:09:26,560 Speaker 1: mindset on problem solving into a business context. So that 167 00:09:26,640 --> 00:09:29,320 Speaker 1: was a really magical experience. But I think some among 168 00:09:29,320 --> 00:09:32,120 Speaker 1: the most formative years were really at McKenzie, where I 169 00:09:32,160 --> 00:09:35,280 Speaker 1: had the opportunity to for the vast majority of that 170 00:09:35,360 --> 00:09:39,520 Speaker 1: experience work with clients on large scale transformation in the 171 00:09:39,559 --> 00:09:43,360 Speaker 1: consumer space. And when I joined my first retail study 172 00:09:43,720 --> 00:09:47,439 Speaker 1: game over, I loved it, absolutely loved it. It was tangible, 173 00:09:47,520 --> 00:09:50,720 Speaker 1: it was real, but it was also right for opportunity. 174 00:09:51,200 --> 00:09:55,360 Speaker 1: His first operational opportunity came at Target, where he led 175 00:09:55,400 --> 00:09:59,240 Speaker 1: a redesign of the company's digital and mobile platforms. From that, 176 00:09:59,600 --> 00:10:01,920 Speaker 1: it was into the c suite at Creighton Barrel, a 177 00:10:02,040 --> 00:10:05,560 Speaker 1: CFO with a stint as interim CEO as well followed 178 00:10:05,559 --> 00:10:08,120 Speaker 1: by a tour as CEO of furniture and home decal 179 00:10:08,200 --> 00:10:11,760 Speaker 1: retailer Our House, and then the season leader took his 180 00:10:11,840 --> 00:10:15,040 Speaker 1: talents back to consulting as a managing director and partner 181 00:10:15,160 --> 00:10:18,920 Speaker 1: at Boston Consulting Group. I really created a space for 182 00:10:19,040 --> 00:10:21,720 Speaker 1: myself at BCG which was really at the intersection of 183 00:10:21,800 --> 00:10:26,320 Speaker 1: retail operations and digital data in advanced analytics. And then 184 00:10:26,679 --> 00:10:29,640 Speaker 1: Macy's comes knocking. When a brand, an iconic brand like 185 00:10:29,720 --> 00:10:33,480 Speaker 1: Macy's comes calling, and the opportunity to reimagine a one 186 00:10:33,559 --> 00:10:36,760 Speaker 1: hundred and sixty two year old business to be relevant 187 00:10:36,880 --> 00:10:41,480 Speaker 1: for the next decade plus, what a great challenge. There's 188 00:10:41,520 --> 00:10:44,360 Speaker 1: no better place to explore how Macy's is meeting that 189 00:10:44,480 --> 00:10:48,400 Speaker 1: challenge than inside its flagship store in New York's Herald Square. 190 00:10:48,920 --> 00:10:52,840 Speaker 1: The building dates back to two but Adrian Mitchell sees 191 00:10:52,880 --> 00:10:56,800 Speaker 1: it as fresh territory. We're investing a lot in a 192 00:10:56,800 --> 00:11:00,240 Speaker 1: lot of different capabilities and features that makes the store 193 00:11:00,240 --> 00:11:04,240 Speaker 1: shopping experience that much easier, that much more compelling, whether 194 00:11:04,280 --> 00:11:08,120 Speaker 1: it's price check, browsing inventory in this store, so that 195 00:11:08,200 --> 00:11:11,040 Speaker 1: we can really make that experience as convenient and as 196 00:11:11,040 --> 00:11:14,640 Speaker 1: simple as possible. Convenient, simple, that's sort of what people 197 00:11:14,720 --> 00:11:17,600 Speaker 1: have needed in the age of COVID. Is that here 198 00:11:17,679 --> 00:11:19,800 Speaker 1: to stay? Or do we go back when finally we 199 00:11:19,840 --> 00:11:22,920 Speaker 1: all hope that the pandemic will be behind us in 200 00:11:22,960 --> 00:11:26,200 Speaker 1: some way, do I changing shopping habits go back again. 201 00:11:26,320 --> 00:11:29,920 Speaker 1: What's really interesting about retail in my twenty plus experience 202 00:11:30,000 --> 00:11:33,560 Speaker 1: is that convenience never reverts itself. Now the form of 203 00:11:33,600 --> 00:11:37,320 Speaker 1: convenience has shifted. Whereas saying two thousands, two thousands ten, 204 00:11:37,400 --> 00:11:40,679 Speaker 1: a lot of convenience was driven by more stores nearby, 205 00:11:40,880 --> 00:11:45,400 Speaker 1: now it's stores in addition to digital. There's nothing closer 206 00:11:45,679 --> 00:11:47,880 Speaker 1: than the phone in your hand, and there's so many 207 00:11:47,880 --> 00:11:51,440 Speaker 1: more touch points. There's social shopping, there's curbside pickup, there's 208 00:11:51,520 --> 00:11:54,080 Speaker 1: at your service, there's on your phone, ship to home. 209 00:11:54,240 --> 00:11:57,560 Speaker 1: This real estate does not come cheap, but it's integral, right, 210 00:11:57,760 --> 00:12:00,720 Speaker 1: it's integral, you know, the physical foot and it integral 211 00:12:00,800 --> 00:12:04,640 Speaker 1: to Macy's success as an omni channel retailer. For all 212 00:12:04,679 --> 00:12:08,880 Speaker 1: of Macy's focus on convenience and simplicity, there's no decline 213 00:12:08,920 --> 00:12:13,000 Speaker 1: in variety. While women's shoes, accessories, cosmetics, and apparel have 214 00:12:13,120 --> 00:12:16,440 Speaker 1: traditionally led the company's revenue mix, there's a commitment to 215 00:12:16,520 --> 00:12:21,160 Speaker 1: expand into new categories. Case in point the pet department, 216 00:12:21,640 --> 00:12:25,559 Speaker 1: where chief Merchandizing Officer Neat ad Ver joined us. And 217 00:12:25,679 --> 00:12:27,640 Speaker 1: one of the things that we observed in the pandemic 218 00:12:28,160 --> 00:12:30,360 Speaker 1: is that customers were giving us permission to sell a 219 00:12:30,400 --> 00:12:32,720 Speaker 1: lot more than what we traditionally have as a Macy's 220 00:12:32,760 --> 00:12:35,680 Speaker 1: department store. And so as we think about the opportunity 221 00:12:35,720 --> 00:12:38,760 Speaker 1: for us to extend into toys and extensions and hair 222 00:12:38,760 --> 00:12:42,319 Speaker 1: care and other parts, pets was clearly a category that's 223 00:12:42,400 --> 00:12:44,920 Speaker 1: large and growing. We're really focused on bringing in the 224 00:12:44,960 --> 00:12:47,240 Speaker 1: millennial mom and all the things that they're shopping for, 225 00:12:47,440 --> 00:12:51,000 Speaker 1: and many times those families also have pets. How do 226 00:12:51,040 --> 00:12:52,319 Speaker 1: you know the best way in which to do it 227 00:12:52,400 --> 00:12:55,720 Speaker 1: from a financial perspective, which is do I build this 228 00:12:55,880 --> 00:12:59,839 Speaker 1: wholeheartedly organically? Do we partner? What are those conversations like, well, 229 00:12:59,840 --> 00:13:02,599 Speaker 1: with a lot of research and there's some experimentation, and 230 00:13:02,640 --> 00:13:04,960 Speaker 1: there's some vets. I think the thing that's exciting for 231 00:13:05,080 --> 00:13:07,319 Speaker 1: us is you have to invest in R and B, 232 00:13:07,720 --> 00:13:10,520 Speaker 1: you have to invest in experimentation. And so having that 233 00:13:10,600 --> 00:13:14,199 Speaker 1: strong financial performance to make these choices, make these bets 234 00:13:14,440 --> 00:13:18,920 Speaker 1: gives us that flexibility. Pets has done well. Also doing 235 00:13:18,960 --> 00:13:22,559 Speaker 1: well the revamped toy department, buttressed by a partnership with 236 00:13:22,600 --> 00:13:25,800 Speaker 1: Toys r us It launched in August as a stool 237 00:13:25,880 --> 00:13:29,520 Speaker 1: within a store. They are expanding into categories that are 238 00:13:30,000 --> 00:13:33,040 Speaker 1: part of that fluency exercise within Armi Channel and Toys 239 00:13:33,160 --> 00:13:35,680 Speaker 1: is a great example of that. The investments that we're 240 00:13:35,720 --> 00:13:38,600 Speaker 1: making that Adrian was really helpful to help figure out 241 00:13:38,640 --> 00:13:40,480 Speaker 1: how we support and how we really invest in a 242 00:13:40,559 --> 00:13:43,800 Speaker 1: category that will take years to kind of really drive 243 00:13:43,880 --> 00:13:45,640 Speaker 1: the type of volume that we're looking for it to 244 00:13:45,760 --> 00:13:48,600 Speaker 1: drive um starts with a big investment, and so that's 245 00:13:48,600 --> 00:13:50,840 Speaker 1: what I'm excited about, is the investment in the future 246 00:13:50,840 --> 00:13:53,920 Speaker 1: of toys starts now and we start reaping those benefits 247 00:13:53,920 --> 00:13:57,359 Speaker 1: over the years to con one of the most important 248 00:13:57,360 --> 00:14:02,000 Speaker 1: functions of Macy stores isn't obvious to customers. They're becoming 249 00:14:02,040 --> 00:14:05,439 Speaker 1: fulfillment and distribution centers, hubs for shipping and pick up 250 00:14:05,559 --> 00:14:09,920 Speaker 1: that lower the costs and increase efficiency across the business. 251 00:14:10,040 --> 00:14:12,160 Speaker 1: We have all these stores across the country with a 252 00:14:12,160 --> 00:14:14,600 Speaker 1: lot of real estate. How do we use a portion 253 00:14:14,640 --> 00:14:17,520 Speaker 1: of that real estate in order to be in market 254 00:14:17,760 --> 00:14:20,680 Speaker 1: with the product to reduce the distance that our product 255 00:14:20,680 --> 00:14:23,080 Speaker 1: has to travel, which means they get it faster. The 256 00:14:23,120 --> 00:14:25,880 Speaker 1: idea of shipping from a distant fulfillment center in the 257 00:14:25,920 --> 00:14:29,640 Speaker 1: middle of a warehouse district, it's just not as efficient 258 00:14:29,680 --> 00:14:31,600 Speaker 1: and certainly not as fast as it needs to be 259 00:14:31,680 --> 00:14:35,080 Speaker 1: in an environment today where customers expect greater speed and 260 00:14:35,400 --> 00:14:37,960 Speaker 1: we have to do it economically because so many customers 261 00:14:38,000 --> 00:14:40,560 Speaker 1: want low or free shipping. So we really did it 262 00:14:40,560 --> 00:14:43,520 Speaker 1: through brute force prior um, but now we're being much 263 00:14:43,520 --> 00:14:46,520 Speaker 1: more deliberate in using lean processes and six signal and 264 00:14:46,520 --> 00:14:50,880 Speaker 1: technology tools and better information to make this process rival 265 00:14:50,960 --> 00:14:52,920 Speaker 1: the efficiency of what you would see in an upstream 266 00:14:52,920 --> 00:14:56,400 Speaker 1: fulfillment center. Some of the merchandise here is marked for 267 00:14:56,560 --> 00:15:00,360 Speaker 1: in store and curbside pickup, and that touch point so 268 00:15:00,560 --> 00:15:03,840 Speaker 1: critical in an omni channel world is getting a makeover. 269 00:15:04,720 --> 00:15:07,040 Speaker 1: So this is the reimagined view of our at your 270 00:15:07,080 --> 00:15:09,960 Speaker 1: service given the categories that were in. We have a 271 00:15:10,080 --> 00:15:13,640 Speaker 1: number of returns, particularly through digital purchases, that come back 272 00:15:13,640 --> 00:15:16,160 Speaker 1: to the store, so it's really important for us to 273 00:15:16,200 --> 00:15:19,040 Speaker 1: be able to have it at your service counter. That's fast, 274 00:15:19,280 --> 00:15:22,560 Speaker 1: that's efficient, that allows a customer to come in very seamlessly, 275 00:15:22,800 --> 00:15:25,520 Speaker 1: but it's also your pickup spot for your bioline pickup 276 00:15:25,560 --> 00:15:29,440 Speaker 1: in store offer. So last year, as we're going through 277 00:15:29,440 --> 00:15:32,120 Speaker 1: the recovery, we invested in a number of stores to 278 00:15:32,200 --> 00:15:34,360 Speaker 1: be able to kind of re imagine what this experience 279 00:15:34,400 --> 00:15:38,080 Speaker 1: looks like and just percentage wise how many customers use this, 280 00:15:38,480 --> 00:15:40,920 Speaker 1: hundreds of thousands of customers that would use this every year. 281 00:15:41,240 --> 00:15:44,720 Speaker 1: The reality is that creating a seamless experience for returns 282 00:15:44,800 --> 00:15:47,160 Speaker 1: is critical. You know, a large part of our business 283 00:15:47,200 --> 00:15:50,240 Speaker 1: is apparel, and apparel by its very nature is a 284 00:15:50,280 --> 00:15:52,840 Speaker 1: business that has a high return rate and those returns 285 00:15:52,880 --> 00:15:55,840 Speaker 1: come back to our stores. So making sure the seamless 286 00:15:55,920 --> 00:15:59,560 Speaker 1: efficient experience is available in every source and really critical 287 00:15:59,560 --> 00:16:04,240 Speaker 1: for customer engagement, customer loyalty. Making returns easy is a 288 00:16:04,280 --> 00:16:08,920 Speaker 1: really important to mention of that. In March one, Sacks 289 00:16:08,960 --> 00:16:12,960 Speaker 1: Fifth Avenue split into two units as parent company Hudson 290 00:16:13,040 --> 00:16:16,120 Speaker 1: Bay spun off its e commerce division from its bricks 291 00:16:16,120 --> 00:16:20,640 Speaker 1: and mortar business. Since then, other retailers like Coles and Nemon, Marcus, 292 00:16:20,640 --> 00:16:24,680 Speaker 1: and Nordstrom have reportedly been mulling similar moves. In October, 293 00:16:24,760 --> 00:16:27,920 Speaker 1: Macy's was urged by activist hedge fund Jana Partners to 294 00:16:28,000 --> 00:16:31,120 Speaker 1: consider a split the company has hard a consulting firm 295 00:16:31,160 --> 00:16:35,080 Speaker 1: to help analyze its options. Well, this financial re engineering 296 00:16:35,120 --> 00:16:38,920 Speaker 1: staff is being driven by a fundamental truth that the 297 00:16:38,960 --> 00:16:41,000 Speaker 1: Internet business and many of these bricks and mortars is 298 00:16:41,000 --> 00:16:44,080 Speaker 1: a pretty darn good business, and as a growing and 299 00:16:44,200 --> 00:16:48,680 Speaker 1: strong e commerce business, so these businesses could theoretically carry 300 00:16:48,760 --> 00:16:51,520 Speaker 1: higher multiples than the company as a whole. And the 301 00:16:51,560 --> 00:16:54,920 Speaker 1: fundamental question you have to ask is will of market 302 00:16:55,600 --> 00:16:57,600 Speaker 1: actually do that over the long term or will they 303 00:16:57,600 --> 00:16:59,720 Speaker 1: simply vary the e commerce business very highly and then 304 00:17:00,120 --> 00:17:03,040 Speaker 1: you know value the what remained, the remain go at 305 00:17:03,040 --> 00:17:05,160 Speaker 1: a very low value and we end up averaging out 306 00:17:05,160 --> 00:17:07,080 Speaker 1: where you started to begin with. Nobody knows the answer 307 00:17:07,119 --> 00:17:09,440 Speaker 1: to that. These are companies that have spent the last 308 00:17:09,520 --> 00:17:14,240 Speaker 1: fifteen years integrating two disparate businesses and really honoring the 309 00:17:14,320 --> 00:17:19,480 Speaker 1: consumer and finding one company one Macy's one Coals, and 310 00:17:19,520 --> 00:17:22,320 Speaker 1: so now to have two separate entities and to have 311 00:17:22,680 --> 00:17:27,080 Speaker 1: a spider web of transaction service agreements and try to 312 00:17:27,119 --> 00:17:30,240 Speaker 1: maintain some degree of integrity and that consumer experience. There 313 00:17:30,240 --> 00:17:34,440 Speaker 1: are some very serious risks on all scenarios. The customer 314 00:17:34,520 --> 00:17:38,919 Speaker 1: experience cannot be disrupted. The customer experience has to be respected, 315 00:17:39,200 --> 00:17:42,600 Speaker 1: whether the synergies are frictional costs of operating separate businesses 316 00:17:42,600 --> 00:17:46,120 Speaker 1: with intercompany agreements. And we also have to also understand 317 00:17:46,119 --> 00:17:49,280 Speaker 1: the execution risk, because the key thing is we have 318 00:17:49,320 --> 00:17:51,760 Speaker 1: to be agile in the way that we actually navigate 319 00:17:51,800 --> 00:17:56,920 Speaker 1: the business. It's constantly changing. Adrian Mitchell isn't just navigating change, 320 00:17:57,119 --> 00:18:01,280 Speaker 1: he's driving it. I asked Macy's Chief Future officer what 321 00:18:01,440 --> 00:18:04,440 Speaker 1: he sees when he looks ahead? Where do you see 322 00:18:04,480 --> 00:18:08,440 Speaker 1: Macy's from your perspective as CFO in ten years time? 323 00:18:08,880 --> 00:18:11,520 Speaker 1: In ten years time, we will be at business that 324 00:18:11,840 --> 00:18:16,720 Speaker 1: is highly relevant, very much digitally lead, with a distribution 325 00:18:16,840 --> 00:18:19,840 Speaker 1: model of physical assets around the country more than what 326 00:18:19,880 --> 00:18:22,800 Speaker 1: you see today, and we're excited about that. It's all 327 00:18:22,840 --> 00:18:26,000 Speaker 1: about customer relevancy, and so continuing to listen to the 328 00:18:26,040 --> 00:18:28,800 Speaker 1: customer think about different ways that the customer is going 329 00:18:28,840 --> 00:18:31,040 Speaker 1: to be shopping is really important. We have to let 330 00:18:31,080 --> 00:18:35,240 Speaker 1: go of the traditional legacy department store habits and evolved 331 00:18:35,320 --> 00:18:38,480 Speaker 1: with the customer in a way that's productive and profitable 332 00:18:38,480 --> 00:18:41,520 Speaker 1: and good for our shareholders. Are those backward looking habits 333 00:18:41,680 --> 00:18:44,320 Speaker 1: the challenge or what are the challenges do you see 334 00:18:44,359 --> 00:18:46,560 Speaker 1: in the next ten years that maybe keep you up. 335 00:18:46,800 --> 00:18:51,160 Speaker 1: I think the biggest challenges pace. It's really pace. If 336 00:18:51,200 --> 00:18:53,639 Speaker 1: you think about the level of disruption that we see 337 00:18:53,840 --> 00:18:57,320 Speaker 1: in retail. We've been living with this for ten years, 338 00:18:57,400 --> 00:19:00,680 Speaker 1: and the page just continues to move faster. In addition, 339 00:19:00,920 --> 00:19:05,840 Speaker 1: consumer expectations are evolving and elevating and changing as fast, 340 00:19:05,880 --> 00:19:10,159 Speaker 1: if not faster, and so as a management team, the 341 00:19:10,200 --> 00:19:13,720 Speaker 1: notion of a five year strategy doesn't really exist anymore. 342 00:19:14,160 --> 00:19:16,720 Speaker 1: You have to be responsive in the moment. You have 343 00:19:16,800 --> 00:19:18,960 Speaker 1: to know directionally where you're going, but you may need 344 00:19:19,000 --> 00:19:21,159 Speaker 1: to shift left or right at a few things to 345 00:19:21,240 --> 00:19:23,720 Speaker 1: the to the strategy, take some things out, make some 346 00:19:23,760 --> 00:19:26,639 Speaker 1: adjustments as you go. And that's the agility that Jeff 347 00:19:26,640 --> 00:19:29,040 Speaker 1: and I and the management team have been doing with Polaris. 348 00:19:29,119 --> 00:19:32,480 Speaker 1: We're constantly challenging the assumptions of our strategy. We're constantly 349 00:19:32,520 --> 00:19:36,280 Speaker 1: making adjustments, but most importantly, our test learned deploy mentality 350 00:19:36,359 --> 00:19:39,400 Speaker 1: has to prove out that the strategies were pursuing or working. 351 00:19:39,760 --> 00:19:42,399 Speaker 1: How are you adjusting your own role? How will the 352 00:19:42,520 --> 00:19:44,840 Speaker 1: role of a CFO change in the next ten years? 353 00:19:44,880 --> 00:19:48,960 Speaker 1: Do you think? I strongly believe that a CFO has 354 00:19:49,000 --> 00:19:52,359 Speaker 1: to look around the corner. A CFO has to think 355 00:19:52,480 --> 00:19:55,960 Speaker 1: not only about the finances and the capital allocation, but 356 00:19:56,040 --> 00:19:59,240 Speaker 1: also about the strategy about getting to know the operation. 357 00:19:59,600 --> 00:20:02,680 Speaker 1: The thing that I encouraged my teams and my colleagues 358 00:20:02,680 --> 00:20:06,879 Speaker 1: within financity was get into the supply chain, walk the store, 359 00:20:08,000 --> 00:20:10,280 Speaker 1: work with the digital team to understand what they're doing 360 00:20:10,320 --> 00:20:12,639 Speaker 1: on the website. Click that you have to understand the 361 00:20:12,720 --> 00:20:17,359 Speaker 1: operation in order to actually manage capital allocation effectively. So 362 00:20:17,400 --> 00:20:19,800 Speaker 1: when we think about our role in finance, it's really 363 00:20:20,040 --> 00:20:23,880 Speaker 1: being shoulder to shoulder with the operators and also engage 364 00:20:23,920 --> 00:20:25,640 Speaker 1: in having a seat at the table when it comes 365 00:20:25,640 --> 00:20:27,920 Speaker 1: to the strategy. That way we can deploy capital most 366 00:20:27,920 --> 00:20:32,920 Speaker 1: efficiently and effectively to maximize return. Is digital the new 367 00:20:32,960 --> 00:20:35,240 Speaker 1: skill set that a CFO needs as well. I think 368 00:20:35,240 --> 00:20:41,359 Speaker 1: it's more data science. It's analytics. Being able to understand, um, 369 00:20:41,400 --> 00:20:46,520 Speaker 1: all the permutations and scenarios that can happen operationally and financially, 370 00:20:47,000 --> 00:20:50,600 Speaker 1: and being able to help the organization create a system 371 00:20:50,640 --> 00:20:55,680 Speaker 1: that can actually move with agility. Simple example, UM, when 372 00:20:55,720 --> 00:20:58,960 Speaker 1: you think about our technology platform, if you think about 373 00:20:58,960 --> 00:21:02,600 Speaker 1: our history, we have a data technology platform that's highly fragmented. 374 00:21:03,040 --> 00:21:07,480 Speaker 1: Should we invest in simplifying our technology stack. Absolutely. Yes, 375 00:21:08,000 --> 00:21:11,400 Speaker 1: it may not have the financial r o I as 376 00:21:11,480 --> 00:21:15,480 Speaker 1: investing in digital marketplace or enhanced experiences or small format, 377 00:21:15,960 --> 00:21:20,160 Speaker 1: but strategically, you can't compete with agility if you've got 378 00:21:20,160 --> 00:21:22,879 Speaker 1: to deal with fragmented systems that take too long to 379 00:21:22,880 --> 00:21:25,959 Speaker 1: get information and make better decisions. So we're simplifying our 380 00:21:26,040 --> 00:21:28,840 Speaker 1: data architecture to be able to create that agility for 381 00:21:28,960 --> 00:21:32,080 Speaker 1: the operating business to generate great results. That kind of 382 00:21:32,080 --> 00:21:34,800 Speaker 1: strategic and operational mindset is going to be necessary to 383 00:21:34,800 --> 00:21:37,280 Speaker 1: get the numbers to work and for the returns to 384 00:21:37,280 --> 00:21:39,679 Speaker 1: be there. So your piece of advice to someone who's 385 00:21:39,960 --> 00:21:42,280 Speaker 1: about to take on the role of the CFO, Yes, 386 00:21:42,560 --> 00:21:45,040 Speaker 1: what would it be? Get to know the business and 387 00:21:45,119 --> 00:21:48,680 Speaker 1: challenge the strategy. Do you if you put yourself in 388 00:21:48,760 --> 00:21:52,320 Speaker 1: the role of the consumer, believe that that strategy is 389 00:21:52,320 --> 00:21:55,080 Speaker 1: what's going to make you more profitable for that business, 390 00:21:55,240 --> 00:21:58,880 Speaker 1: more engaged, shot more frequently, and choose that company over 391 00:21:58,920 --> 00:22:02,080 Speaker 1: the competition, and get into the operation. There's lots of 392 00:22:02,119 --> 00:22:05,960 Speaker 1: opportunities in the operation. Basic things like the store is 393 00:22:06,000 --> 00:22:10,040 Speaker 1: staffed appropriately, inventory is in the right place. The basics 394 00:22:10,040 --> 00:22:12,720 Speaker 1: of retail still matter. The fundamental still matter. You have 395 00:22:12,760 --> 00:22:15,520 Speaker 1: to execute while on the fundamentals to create the capacity 396 00:22:15,520 --> 00:22:17,920 Speaker 1: in the room to be able to invest in innovation. 397 00:22:20,320 --> 00:22:25,000 Speaker 1: Innovation married to execution. That's Adrian Mitchell's calling card, and 398 00:22:25,080 --> 00:22:28,359 Speaker 1: it's his formula for guiding Macy's into a bright future. 399 00:22:29,400 --> 00:22:32,520 Speaker 1: I'm Caroline Hyde. This is Bloomberg.