Macy’s announced Thursday that longtime chief executive Terry Lundgren will step down from the position in 2017. Jeff Gennette, the department store chain's current president, will step up to the plate.
The shift in leadership comes amid Macy’s struggles to compete in a quickly changing retail market. Despite a recent uptick in stock price, Macy’s shares have lost almost half their value over the past year. Macy’s has seen five straight quarters of sales declines, including a 7.4 percent dip in the first quarter.
Macy’s business woes aren’t unusual. Other major department stores, like Kohl’s and Sears, are experiencing declining sales. Sears shares plummeted 68 percent in 2015.
The future is uncertain for department stores as they face stiff competition from online shopping sites, discount chains, and fast fashion retailers (like H&M). Under Mr. Lundgren’s leadership, Macy’s has tried to adapt.
While closing 40 of its name-brand stores in the next year, Macy’s plans to open a new line of outlet stores under the name Backstage. Macy’s has also begun leasing store space to other companies, like Men’s Wearhouse and Sunglass Hut, and pursuing creative ways to make money off its real estate. Last year, Macy’s sold a portion of its building in Brooklyn to developer Tishman Speyer.
Mr. Genette, Macy's newest CEO, was promoted from within the company, a move that is waning in popularity in the corporate world. Increasingly, companies are choosing new leaders from the outside. The percentage of boards choosing to hire CEOs outside of the company rose from 14 percent in 2004-2007 to 22 percent in 2012-2015, according to a 2015 survey from Strategy&, a consulting division of PricewaterhouseCoopers. Some are skeptical that someone as familiar with the company as Genette will be able to implement the radical changes needed to boost sales.
“He’s very much a Macy’s insider,” Neil Saunders, CEO of retail consulting firm Conlumino, told the New York Times Thursday. “He knows the business inside and out, and he’s worked very closely with Lundgren for many years. In a way, they’re just swapping seats.”
Gennette was been with Macy’s for 33 years. He was the chain's merchandising officer for from 2009 to 2014 and has served as company president since 2014.
Lundgren, meanwhile, won’t be far from the decision-making table. He has served as CEO of Macy’s for the past 13 years, leading the store throughout its merger with May Department Stores in 2005 and changing the name of the holding company from Federated Department Stores to Macy’s in 2007. Lundgren will now assume the role of chairman. "I told the board, I’m ready to go when you want me to go, but having been CEO for 13 years puts me in a unique position to be helpful,” he told the Wall Street Journal.
As internet sales rise and department store sales fall, Gennette will have his work cut out for him in trying to pave a new path for department stores and establish Macy’s dominance in the retail sector.