Transcript

Beyond the Parade: Macy’s navigates tariffs, turbulence and retail evolution

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1:20 Join us at masters of scale dot com slash apply twenty six. That's mastersofscom slash apply. Twenty six. I think we're on version number 27 of uh our forecast and plan because of the interesting environment that that we're operating in 2025. On Tuesdays I might have to be a peacetime leader.

1:45 And on the first day of uh November you may need to be a wartime leader. People don't expect perfection. We're not unlike uh baseball or or other sports where if we can do better than the average, if we can do better than we've done historically, we're gonna be rewarded. In the case of the recipe for Macy's or Blue Mingos or Blue Mercury, We have to get the proportions right. Some things are icing. Other things are more foundational.

2:10 What matters tomorrow is gonna be different than mattered yesterday. That's Tony Spring, CEO of Macy's Inc. I wanted to talk to Tony about the retail environment as we head into the heat of the holiday shopping season. Tony talks about evolving buying habits, the impact of tariffs and more, plus he offers a preview of what to expect at this year's Thanksgiving Day parade. There's a lot to browse in Tony's world, so Let's get to it. I'm Bob Safian and this

2:48 is rapid response. I'm Bob Safe, and I'm here with Tony Spring, CEO of Macy's Inc. Tony, thanks for uh joining us. Thank you, Bob. Great to be with you. You know, I was I was thinking of you uh last night there was this Nor'easter that blew through New York City. And I was thinking of those balloons at the Thanksgiving Day parade. And when it's super windy, like who makes the call and which balloons are allowed to fly at the parade? Does that does that is that you?

3:20 Uh no, thank God. It's the our parade our parade team in conjunction with uh with the city. I think over over the years we've been lucky that we've only had a couple of instances where the weather didn't really cooperate and we've had to kinda come up with great structure around making the decision about when the balloons can fly and how high they can fly. No, I I am a I'm a native New Yorker, so even as a as a I a youngster, I remember with my friends going and watching the balloons being blown up the night before. We are the only company that has something called an inflation event that's actually positive. There you go. Well, listen, it's great to be to be chatting uh in this crazy season. Holiday shopping seems to kick in earlier each year. For Macy's with with the Thanksgiving Day parade, the sprint to Christmas, it's it's like your Super Bowl.

4:10 What's distinctive about twenty twenty five, about this year? I mean the the economic and shopping environment has been Pretty Chaotic. I think the news certainly makes things more complicated. I think people are uh confused. We had a terrific second quarter. Uh we talked about the back to school business being uh pretty healthy, and yet we all see uh potential storm cloud storm clouds uh on the on the horizon. So we're we're trying to be Cautiously optimistic.

4:40 What has driven consumption so far is some of the things in retail that we learned right from the beginning, which is newness. fashion, a change in silhouette, a change in fabrication. And so we we have to just really focus on making sure that you find those things that Macy's in Bloomingdale's in Blue Mercury. Yeah, I mean the the consumer behavior changes, they're they can be so hard to um to parse, right? And you've got s you know, supply changes and tariffs and sort of inflation and all those things. And we don't always know how those things are gonna are gonna impact. So you you you focus on On what you can control. It is control of the controllables and you could uh stay up all night worrying about the weather that we were talking about or what's gonna happen with uh snowstorms in the in the fourth quarter. But but in reality, our job is to make sure we create a better shopping experience for the customer.

5:35 There's plenty of things that are out of our control that we get obsessed about. But it really doesn't uh doesn't satisfy anything or make it feel any better. Yeah. And and and now for for the parade, this is if I have it right, this is the hundred and first year. So one past the centennial. So like How do you keep it fresh following a big milestone? Well, it's the ninety ninth parade, but the hundred and first year.'Cause we did take a couple of years off during the uh second world war.

6:03 So uh making sure every year the parade has again newness. We have uh partnerships with Disney and we have Pokemon and we have uh this year new uh Pop Mart. So Laboo Boos. Uh we we wanna make sure that Whatever is popular and whatever is interesting weaves its way not only into our merchandise strategy, but also into an iconic event like the Thanksgiving Day parade. Thirty two million people approximately are gonna watch it on on TV and we have several million more that uh come live in person in New York City on that day. Macy's has a an iconic place in in American culture. Although obviously hasn't been immune to the challenges in retail. You launched what you call a a bold new chapter after becoming CEO in twenty twenty four. It's show traction in your financial results, but you're still sort of in the midst of it. What like what's working, what's not, what are you what are you tweaking?

7:02 Sure. Well let me break it into the three parts. So the first was strengthening and and reimagining Macy's, and that included closing underproductive stores and betting on our future state uh stores. So putting more colleagues into the stores, putting new merchandise into the stores. after talking to sixty thousand customers in twenty twenty two and twenty twenty three about what they liked and didn't like about the shopping experience, we were responding with things that were important to them. We also improved our digital platform. Uh and double down on our luxury businesses, which include Bloomingdale's and Blue Mercury. So we got three wonderful uh iconic brands in the retail industry. How do we make sure we're getting our fair share of uh all of those businesses? And then the final part of the strategy is is end to end operations. And that's making sure we're utilizing automation and uh robotics and AI and making sure the complexity that might exist in our business doesn't

7:59 Affect the consumer. So that speed of delivery, that's the efficiencies that we put in in the back of house. I was actually talking to a CEO last week who said AI's like a drinking game. You have to mention it and every every time you say the word the the phrase AI, you have to take another drink. Um not all not all businesses are getting the AI payoff that they that they hope for. And I'm curious how it's going for you. we're uh putting pokers in the fire, which means uh it's it's not limited to one aspect of the business, but we wanna make sure that we're partaking in p trial and error and testing and learning in a in a multitude of areas of the business. So It's uh being uh uh tested in our uh supply chain. It's being utilized uh in our call center. Uh we're experimenting and trying to improve our planning and allocation of uh inventory. We're using it in in uh our HR function in our marketing department.

8:57 Is it something that I would say is scaled yet? Is it something that is transformational yet? No. But but I think both things, this is the case of two truths. Uh it can be that people are uh using the word uh too much and too often, and it will change our lives. So I I believe both things are true, that we're still in the infancy of value uh added, but nor are we uh, you know, uh excluded from participating in this learning period as long as we don't over invest. Yeah, I mean it is it is tricky, right?'Cause there's so much um I don't want to say hype, but you know, it feels like oh, it's gonna change everything. And I think we do believe that, but the the time of when and where those things are gonna happen, we just don't really know yet. Yeah, I think at what cost and in what time are two good questions that we don't have the answer to. But I but in the interim, how do you encourage your organization to have an open mind?

9:53 To uh be experimental. uh to not lose focus from uh what problem you're solving for. So we don't just adopt s shiny objects that people show to us, but we really talk about the fact that You know, we believe in humanity. So in my mind, uh AI or technology in general should allow us to scale humanity. Your stores face pressure from everywhere. You know, fast fashion and e commerce and social shopping and live shopping. H how do you think about

10:24 That sort of in person Human Interaction versus The digital commerce. I I mean, especially as you're you know, you're trying to look to next generation consumers. I talk to our team all the time about the word balance and and I don't think the word gets enough uh volume or credit. And in the case of digital shopping, of course.

10:46 You know, everybody is gonna do some level of digital shopping. And people are also gonna do uh in person shopping. There's some reports out now that the next generation is in longing for socialization and uh in person shopping is a big part of what they're they're doing together. The resurgence of Not the bad malls, but the A malls. There is a place, I think, for uh all these types of businesses as long as we pay attention to what the consumer wants. That's why when you say social shopping, sure we do it. Uh digital shopping, uh sure uh we do it. Uh physical shopping, uh sure we do it. That's the balance that the consumer's looking for where they actually decide what's right for them.

11:24 I mean I I feel like it's gotten harder to get Folks to bond with any Um IRL brands these days. You know, I'm curious whether you think about leveraging Macy's brand. beyond the store. I mean, Mattel had a home run with the Barbie movie, like or is there gonna be a remake of Miracle on thirty fourth street in the often? Like how how do you think about you know about going beyond just the store to connect emotionally?

11:52 So we we agree with you. I think the uh parade, the fireworks, the flower show are all incredible, iconic events that allow us to transcend what is uh just transactional retail and allow the Macy's brand to live in people's lives. Almost seventy percent of our business still remains in in physical retail, which is very consistent with the industry averages. That doesn't mean we don't love our digital business. If uh we were selling uh paper towels, Uh that who wants to go shopping for paper towels? I'd like to have those delivered to my house uh right before I run out of them. But I think there are other things that are fun to do in person. And by the way, when we have a DJ on a Saturday, when we do bottle engraving, When we sh people show how to do flower arranging, you can get people to turn out to the stores because it com becomes an extension of what they want to do for the weekend. What's the family gonna do? I think a big part of our bold new chapter is stepping up to the fact that a good retail experience. people are looking for.

12:52 A bad or a mediocre r uh retail experience. People People can do digital, but they don't they don't need to uh exhaust themselves with that experience. The b but the bar keeps going up. Right. And it it does, but but so do the opportunities to leverage uh technology to improve the humanity that we provide. So we have traffic counters and conversion measures in every one of our stores by hour.

13:17 So we know where we are undershooting and where we are overshooting the consumer. So if we need more people between two and five o'clock on Saturdays, we're gonna have more people. uh between two and five o'clock on Saturdays. If we have too much staffing on Monday mornings, we're gonna try to reduce the amount of staffing that we have in our stores uh on on Monday mornings. There is a piece of our business that is very much about Mary, you know, in Tyson's corner or or Sally in in our Miami International store. I think you've seen So many digitally native businesses look for physical retail to sustain themselves in the future because what do they really have? They have a transaction, they don't have a relationship. And our business is still grounded in relationships.

13:58 Mm. I I I wanna ask you about uh Planning and decision making it in twenty twenty five. One CEO I talked to recently told me that you know things change so fast that he's been forced to like update his plans as often as weekly, right? Things are shifting so fast. You get new data constantly. I'm curious. What you look at and how fluid you have to be with with your plans. You have to be very fluid.

14:26 I mean to be candid in the age of uh uh tariffs and in the uncertainty of uh supply chains, uh plans are the guardrails. And the longer the plan, the less accurate it is. So you do uh deal with a rolling operating forecast, which is something that we update on a on a weekly and and monthly basis, and that kind of gives us uh greater visibility into how to allocate inventory, how to plan our staffing, how to uh change our marketing so that we're doing it in in real time, not based on some plan that we developed three or six months ago, which may at this point be somewhat outdated. I think we're on version number twenty seven of uh our forecast and plan because of the interesting environment that that we're operating in twenty twenty five. Interesting environment indeed. Tony is looking on the bright side even as he's

15:19 Pressing the organization to be more fluid in a disruptive world. So what kind of leader does he need to be to make that happen? And how does he deal with naysayers who may not be as excited about the Thanksgiving Day parade as he is? We'll talk about that and more after the break. Stay with us. The Wired Newsroom is known for award-winning reporting on how technology shapes our world. On Wire's Uncanny Valley, we take that curiosity even further. Each week, journalists from Wired break down the biggest stories in tech while speaking directly with the people building, challenging, and reshaping the future.

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16:20 Hey listeners, Bob here. If you listen to Rapid Response on Masters of Scale, you may be missing half the show. Because every Friday we release a second rapid response exclusively in the Rapid Response feed. The guests and topics are just as compelling and timely from Ford's CEO to NASA's administrator to the lessons from The Devil Wears Prada. It takes about 10 seconds to find, just search rapid response wherever you listen to podcasts and hit follow to make sure you never miss an episode. I hope to see you there. Humans will never be more intelligent than AI. There's gonna be two types of companies.

17:02 Those were great at AI and those that went out of business because they weren't. How do we build a future? That is human centered. I'm Rana El Calyubi. And on my podcast Pioneers of AI, we answer that question and so many more. As an AI scientist, entrepreneur, and investor, I know what it takes to build AI that works for everyone. Every week I sit down with the pioneers shaping our future.

17:28 and we take you behind the scenes of the AI that's transforming our lives. Find pioneers of AI wherever you tune in. Before the break, we heard Macy's Tony Spring talk about 2025's complicated retail environment. Now he talks about his leadership lessons for this moment, when to be a wartime leader and when to be a peacetime leader, plus why he believes department stores are actually perfectly positioned for today's consumer marketplace. Let's jump back in. I'm always curious, you know, as you move up in an organization, you often take on more tasks that may not be the thing that you know, got you excited about the business in the in the first place. Like what are are there things that you do that sort sort of feed your energy, feed your soul as you're as you're running the company that maybe you could hand off to someone else, but you do because

18:26 You know, you just you just like it. It allows you to do everything else better. I'm sure if you talk to different uh functions in our company, they would say they'd love for me to spend a little less time in in that function. But no, si uh seriously, I love uh the marketing. I l I love the merchandise. I I started on the sales floor, so I I do enjoy the uh consumer interaction, I don't actually get to buy anymore. I I don't actually get to decide what we're putting uh in our social channels, but I can be a great sounding board and I can be someone who can help shape uh our priorities. What's your role when it comes to the Thanksgiving Day parade itself? Like what what do you do that day? Are are you ever tempted to cast yourself as Stay out of the way? No, I I arrive early. I I participate in a little bit of media, check in on the teams and and I joke, stay out of the way, but really

19:19 This is a wonderful craft. They spent an entire year getting ready for this uh parade. I'm a proud kind of uh I would say father, but I I'm proud of the team kind of when I look at what they've been able to accomplish. Uh I'm I'm an attende, uh, so I I get to be able to clap and and cheer along with other uh native New Yorkers. And then I can't wait to see the ratings to see uh to see how we did and hopefully we we did better again this year. Our listeners are business people in all kinds of industries, and I'm curious if you have Any advice for them about how to navigate as a leader in these times? Cause it it has felt very disruptive and and chaotic.

20:02 I was taught growing up in the business by uh uh mentors that that I had I I was challenged to make sure that I balanced both self awareness and ambition. People don't expect perfection. We're we're uh We're not unlike uh baseball or or other sports where if we can do better than the average, if we can do better than we've done historically, we're gonna be rewarded. Uh celebrate small victories.

20:27 I I know it seems trite, but but the day goes so fast and with the information available at your fingertips by the minute, the one thing we sometimes skip over is the important acknowledgement. Of progress, a pat on the back. Um uh a recognition of uh something done exceptionally well. I went to school for Uh hotel and restaurant management and we had a

20:50 A lab on uh food chemistry. And I and I love the class because there were seven different groups. Only one group had the right recipe for bread. Everyone else's loaves uh fell. And and it was a good reminder that ingredients In the right proportion. made in the right order, make such a difference in whether you get the recipe you're looking for. So in the case of the recipe for Macy's or Blue Mendo's or Blue Mercury, We have to get the proportions right. Some things are icing. Some things are just designed to kind of like uh hit your sweet tooth.

21:21 Other things are more foundational. And making sure that the team understands the difference between the two can be you know, so important in making sure that we allocate our investments appropriately, or we take the time to appropriately recognize our our colleagues, or that we take the time to make sure that we are connecting with consumers. There's a timelessness to uh to the way you're you're talking about sort of what the the needs are and what and what you're trying to meet. And I'm I'm curious the you know, there's um an analogy that people sometimes use that, you know

21:52 Sometimes you need a wartime leader and sometimes you need a peacetime leader, and there's a you know a different strategy for each one of them. And I'm curious whether you feel like for Macy's Is today war time or peace time, you know, and and how would you cast yourself in that? That's a great it's a great question. I I I'd like to say it depends on the day of the week you ask me. And I think the the challenge for our business is on Tuesdays I might have to be a peacetime leader. Uh and on the first day of uh November you may need to be a wartime leader. And in the environment we're operating with with unexpected tariffs by the middle of the year that didn't exist at the beginning of the year, there's a lot of wartime uh philosophy that I think you have to be able to uh deal the help the the hand you're dealt.

22:40 Uh and at the same time you know, we are in a business for the long term. We are not trying to just have a great third quarter. We're trying to have a great business that lasts uh decades, if not more. What matters tomorrow is gonna be different than mattered yesterday. I use the phrase graciousness and kindness the last time I check. Don't cost money.

23:00 So how do we make sure that we imbue and express those things on a regular basis because we're going to get a lot of credit for it. Mm. So so what's at stake for for Macy's right now? Oh, I think making sure that uh we turn the naysayers in into uh believers. The advocate I love.

23:20 The the critic, I welcome Um the Cynic, I'd like to go away. So the cynic is one who really is destructive to the work that we do. The critic is one that can actually be constructive to the work that we do, as long as we listen carefully to the meaning behind uh their advice. And then the advocates we gotta give a megaphone to. In some ways people take the fact that Macy's has been around as long as it's been around for granted. And in other ways, it's kind of a miracle that with all the changes that have happened in the in the marketplace over that time and even in recent times that You know, that you guys continue to exist and that we have the parade coming again.

24:04 I think back to kind of self awareness and ambition. We're self aware enough to know. We don't get everything right. We want to deliver a better experience and we're ambitious enough to know We're defining this generation of Macy's and Blue Mingels and Blue Mercury. How will people look at the time and the focus that we've put into

24:24 these businesses to make sure that they're around in the future and that they mean something to the next generation of consumers. We are a part of what people have grown up with, and I have every intention of making sure we're a part of what my kids and grandkids grow up with as well. And in a world where people question whether or not the department store is a viable concept, I I I ask people to suspend the word department store for a second and say marketplace. And if I have the ability to buy any category Any brand. a range of price points, serve five generations of customers, have a physical business and a digital business. What is so dated and old about this concept? And aren't we actually on the beginning or cusp of what's going to be the future state of retail and looking to be their favorite retailer? Mm-hmm. Well

25:15 Tony. This was great. Thanks so much for uh for joining us and for sharing with us. Thank you very much for having me. Okay.

25:26 Tony's defense of the department store model is so interesting. He's not resisting the many changes that we're going through, but he's also not running away from the strengths that have long defined Macy's business. It's a delicate balance that applies to so many organizations right now across multiple industries. We may be forced to take big bets as our world changes, but we need to acknowledge that that can leave us exposed. So how do we find the right bets at the right time? And what should we protect at all costs that makes us distinctive and special and sustainable? Those questions matter more than ever right now.

26:03 I'm Bob Sathien. Thanks for listening. Rapid response is a wait what original. I'm Bob Safian. Our executive producer is Eve Tro. Our producer is Alex Morris. Associate producer is Mashumaku Tonina. Mixing and Mastering by Aaron Bastanelli.

26:28 Our theme music is by Ryan Holiday. Our head of podcasts is Le Tal Malad. For more, visit rapidresponsshow.com.