WEBVTT - Cowen's Chen: We Are Seeing the Modernization of Macy's (Audio)

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<v Speaker 1>This is a Bloomberg Business Flash from Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellette. The three major US stock benchmarks are

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<v Speaker 1>time in sixteen years. This amidst surprising earnings. May sees,

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<v Speaker 1>for example, surging now by seventeen point five percent, the

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<v Speaker 1>SMP five hundred, indecks up twelve to a record eight,

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<v Speaker 1>at eighteen thousand, six d thirty one climbing a hundred

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<v Speaker 1>and thirty five points up seven tenths of one percent.

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<v Speaker 1>Gold down eight thirty ounce now to thirteen thirty nine,

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<v Speaker 1>up three point nine percent of barrel of West Texas

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<v Speaker 1>Intermediate root of a dollar sixty four to forty three

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<v Speaker 1>thirty five five right now on West Texas Intermediate. I'm

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<v Speaker 1>Charlie Pella. That's a Bloomberg Business Flash. Charlie Pella, thank

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<v Speaker 1>you so very much. It's time now for the e

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<v Speaker 1>t F Report, and it's brought to you by National

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<v Speaker 1>Realty Providers of one Satisfaction Guaranteed New York City Realty

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<v Speaker 1>Investments see them at n r I A dot net

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<v Speaker 1>internet e commerce, online shopping. How can you profit from it? Well,

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<v Speaker 1>let's find out. Returning now to our own Katherine Cowry

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<v Speaker 1>for today's et F report, Globally, retail sales are expected

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<v Speaker 1>to store past the one and a half trillion dollar

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<v Speaker 1>marked by that's according to Statista. And yes, there is

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<v Speaker 1>an et F aimed at tapping into that growth. It's

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<v Speaker 1>the Amplify Online Retail et F. Taker I b U

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<v Speaker 1>y or I buy. Christian Magoon, chief executive of Amplify Investments,

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<v Speaker 1>on why his firm decided to launch the e t

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<v Speaker 1>F this year. Even though a lot of people are

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<v Speaker 1>familiar with online retail sales, it's only seven and a

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<v Speaker 1>half percent of US total total US retail sales, so

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<v Speaker 1>we think they're um this this has room to maybe

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<v Speaker 1>double or triple over the next four or five years,

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<v Speaker 1>and we've seen research that supports that. Magoon says, there

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<v Speaker 1>are three types of companies in the e t F.

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<v Speaker 1>The largest allocation is traditional retailers. It's about six of

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<v Speaker 1>the e t F. And these are companies like pet

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<v Speaker 1>meds UM, companies like Lands and that are doing again

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<v Speaker 1>seventy or more of their sales from through an online channel.

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<v Speaker 1>I buy has two point seven million dollars in assets

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<v Speaker 1>under management and an expense ratio of sixty five basis points.

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<v Speaker 1>That's your Bloomberg ETF report. I'm Katherine Cowdery. This is

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<v Speaker 1>taking stock with Kathleen Hayes and Prim Fox on Bloomberg

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<v Speaker 1>Radio The world of retail. Taking a look at Macy's today.

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<v Speaker 1>The shares are higher by more than seventeen per cent.

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<v Speaker 1>Why while the company announces that it will shut her

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<v Speaker 1>more than one stores that's about fiftent of its base

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<v Speaker 1>and cut jobs in order to combat sluggish traffic as

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<v Speaker 1>well as discounters. Here to tell us more is Oliver

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<v Speaker 1>chen he Is, managing director and senior retail analystics Kalin

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<v Speaker 1>and Company. Oliver, thank you for being with us. Tell

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<v Speaker 1>us about Macy's and their plan to fix what is

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<v Speaker 1>a struggling retail empire. Yeah, what happened today in Macy's

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<v Speaker 1>where the comp store sales were better than feared, so

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<v Speaker 1>they came out still negative negative two point six, but

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<v Speaker 1>Street was looking at a negative four point seven, so

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<v Speaker 1>better than feared combined with very low bar in terms

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<v Speaker 1>of the sentiment into the print. So what's happening in

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<v Speaker 1>retail right now and them there is a bit of

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<v Speaker 1>a retail revolution because quite simply, the customers have been

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<v Speaker 1>moving faster than retailers and what customers want and the

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<v Speaker 1>biggest problem is just getting people to walk into stores.

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<v Speaker 1>There are so many distractions, there's it's so much easier

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<v Speaker 1>to shop online now and people have stores on the

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<v Speaker 1>palm of their hands, so there's a new bar in

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<v Speaker 1>terms of interesting people in terms of just walking in

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<v Speaker 1>the store. So the store traffic is a big problem.

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<v Speaker 1>And closing one stores was applauded by the Street because

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<v Speaker 1>that's part of the process as Macy's really tries to

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<v Speaker 1>focus focus as well as get closed stores which make

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<v Speaker 1>less sense to them in terms of sales productivity. Um,

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<v Speaker 1>so we're really seeing a modernization of Macy's on many levels.

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<v Speaker 1>So Oliver, what will Macy's look like then? Is this

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<v Speaker 1>the end of you know, the big department stores. We

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<v Speaker 1>know it. We know that. Going the other direction, there's

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<v Speaker 1>been companies like Warby Parkers started out online and they're

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<v Speaker 1>opening brick, brick and mortar after brick and mortar after

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<v Speaker 1>brick and mortar. Yeah, Kathleen, I think it's it's really interesting.

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<v Speaker 1>I mean, our view here at Cowen is the future

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<v Speaker 1>is bricks plus clicks. So we even see concepts like

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<v Speaker 1>Warby Parker, you know, open stores and really try to

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<v Speaker 1>embrace the customer. Macy still has a really compelling assortment.

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<v Speaker 1>You really need to touch and feel and get get

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<v Speaker 1>into the store to understand fashion, and that's a key point.

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<v Speaker 1>But we have to see Macy's really excite millennials and

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<v Speaker 1>Generation Z folks who are really interested in looking at

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<v Speaker 1>Instagram feeds and traveling and experiencing great things that they

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<v Speaker 1>can brag about online. So Macy's needs to reinvent itself

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<v Speaker 1>and become a cool, exciting cultural institution again. And that's

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<v Speaker 1>going to require change. Change with product assortment, change with service,

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<v Speaker 1>and change with how customers interact with the store. Shoppers

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<v Speaker 1>are selfish, We're selfish with their time, and we're looking

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<v Speaker 1>for value, value as it applies to your time as well. Oliver,

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<v Speaker 1>I wonder if you could comment about the competition coming

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<v Speaker 1>from stores such as Zara, h and m Top Shop, Unchlow,

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<v Speaker 1>Forever One. They're not closing stores, are they. Yeah. What

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<v Speaker 1>what we see there is a is a healthier environment

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<v Speaker 1>and pm UM they have really done a great job

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<v Speaker 1>the bottom line on a lot of the fast fashionist speed.

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<v Speaker 1>So we're moving towards this, this generation of continuous shopping,

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<v Speaker 1>seasonless shopping. You know, I want what I want when

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<v Speaker 1>I want it, So you're walking into store and you're

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<v Speaker 1>seeing collections online and you really want that now. And

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<v Speaker 1>a lot of those concepts have executed that extremely well

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<v Speaker 1>with great supply chains. So it's up to retailers like

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<v Speaker 1>Macy's to to really face that in the form of

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<v Speaker 1>assortment and speed um and and we're seeing, you know,

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<v Speaker 1>strength with that because those fast fashion competitors you named

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<v Speaker 1>offer good speed, good prices, and customers do not want

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<v Speaker 1>to wear One brand had to tell they're really not

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<v Speaker 1>shopping that where anymore. So contrast Macy's two Coals very

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<v Speaker 1>different response today. Yeah, you know Coals was also it

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<v Speaker 1>was an inline camp and they guided EPs down so

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<v Speaker 1>it was all a little better than feared story a

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<v Speaker 1>little bit different. They don't have as an aggressive as

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<v Speaker 1>a store a closure plan right now, and it's also

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<v Speaker 1>going through transformations with with the brand portfolio. But we

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<v Speaker 1>still saw some nice stock upside at Coals as well

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<v Speaker 1>and Um. You know, overall today this better than feared

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<v Speaker 1>scenario which played out has benefited both stocks. Tell us

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<v Speaker 1>about Nordstrom that Northstrom perhaps is in a different category,

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<v Speaker 1>perhaps more upscale. But I'm wondering if you could tell

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<v Speaker 1>us about Nordstrom and it was founded as a shoe

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<v Speaker 1>company and it has some of the same issues that

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<v Speaker 1>you talk about with Macy's and Coals. What's different about

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<v Speaker 1>north Trum and what what investors and others should realize

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<v Speaker 1>is north Trum has a nice portfolio because it was

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<v Speaker 1>early to online, so we have a nice attractive online

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<v Speaker 1>mix of business of high teens to it has Northstrom Rack,

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<v Speaker 1>which is of the business, and then it has the

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<v Speaker 1>full line. So we see a portfolio of concepts and

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<v Speaker 1>you can trast that again against Macy's, which is really

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<v Speaker 1>just starting an off price concept. And then if you

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<v Speaker 1>think about retail large, you gotta remember t j X

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<v Speaker 1>and Ross off price has really been in the sweet spot.

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<v Speaker 1>So Nordstrom having that portfolio, combined with being a customer

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<v Speaker 1>first organization, very focused on what customers want, even at

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<v Speaker 1>the expense of margins, has really helped prepare it for

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<v Speaker 1>the long term. That being said, there's still problems in

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<v Speaker 1>retail and we're cautious. Well, Oliver, what the heck can

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<v Speaker 1>Macy's do? You just said, oh, they have to do

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<v Speaker 1>these things. Okay, someone makes you the head of Macy's.

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<v Speaker 1>What are you gonna do, Oliver, How are you gonna

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<v Speaker 1>change Macy's to have them compete with online shopping, which

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<v Speaker 1>is growing all the time. Well, they Macy's is still

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<v Speaker 1>one of the biggest players in retail, but Amazon is

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<v Speaker 1>a huge factor with convenience. But Macy's knows Fender as well.

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<v Speaker 1>They can get exclusive product made from Macy's. They have

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<v Speaker 1>a tremendous brand equity and household appreciation, and they have

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<v Speaker 1>really stronger knowledgement of the situation and a very good

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<v Speaker 1>management team who's rationalizing real estate. They just have to

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<v Speaker 1>move fast. They have to make stores fun again. They

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<v Speaker 1>have to add experiences. What I think they're doing now

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<v Speaker 1>is pivoting to offer more service. So when you walk

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<v Speaker 1>into Macy's. You don't really want to see messy piles

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<v Speaker 1>of stuff. You want to see someone that really helps

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<v Speaker 1>you navigate. You also want to have fun. You want

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<v Speaker 1>to do health and wellness too, So maybe you could

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<v Speaker 1>exercise in the store. You could get some health and wellness,

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<v Speaker 1>um juice bar, restaurants, uh, watching an art gallery what

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<v Speaker 1>I think they could expand it further. I mean, I

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<v Speaker 1>think there's all these opportunities because the main issue is

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<v Speaker 1>this traffic situation. So uh, they have to really offer

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<v Speaker 1>the consumer kind of double duty and and refocus everybody.

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<v Speaker 1>In addition to clothing, Does Terry London really have what

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<v Speaker 1>it takes to turn Macy's around? I mean he goes

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<v Speaker 1>all the way back to Bullocks and federated department stores.

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<v Speaker 1>I mean, if you can go back to the nine

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<v Speaker 1>nineties when Federated at Macy's combined, Uh, that was seen

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<v Speaker 1>as a way to create a retail juggernaut. We are

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<v Speaker 1>excited about management because Terry knows the organization. There's a

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<v Speaker 1>new CEO coming as well, and they really understand, you know,

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<v Speaker 1>how to impact the large organization and what the problems

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<v Speaker 1>are now versus what the future can hold. So Macy's

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<v Speaker 1>really does face challenges every every three to five years

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<v Speaker 1>about reinventing itself. A setback is a set up for

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<v Speaker 1>a comeback, and they've been aggressive about communication here. We

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<v Speaker 1>do have a market perform rating on the stock, but

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<v Speaker 1>I'm I'm cautiously optimistic about what's possible and I'm excited

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<v Speaker 1>about what what can be possible. Albert Chan, that's a

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<v Speaker 1>great phrase. I'm going to use that a setback is

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<v Speaker 1>a set up for a comeback way and implying that

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<v Speaker 1>do a lot of things in life. At Oliver Chan today,

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<v Speaker 1>managing director and senior retail analysts from Cowen and Co.

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<v Speaker 1>Applying it to Macy's and its management. You can follow

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<v Speaker 1>Oliver at Cohen c O W E N Research. I'm

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<v Speaker 1>Kathleen Hayes along with Pam Fox. This is Bloomberg. H