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

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1:15On Tuesdays, I might have to be a peacetime leader, and on the first day of November, you may need to be a wartime leader. People don't expect perfection. We're not unlike baseball or other sports where if we can do better than the average, if we can do better than we've done historically, we're going to be rewarded. In the case of the recipe for Macy's or Bloomingdale's or Blue Mercury, we have to get the proportions right. Some things are icing. Other things are more foundational. What matters tomorrow is going to be different than mattered yesterday.

1:55that'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 is rapid response.

2:28I'm Bob Safian. I'm here with Tony Springs, CEO of Macy's Inc. Tony, thanks for joining us. Thank you, Bob. Great to be with you. You know, I was I was thinking of you 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 on which balloons are allowed to fly at the parade. Is that you? No, thank God. It's our parade team in conjunction with the city. I think over the years, we've been lucky that we've only had a couple of instances where the weather didn't really cooperate.

3:06And we've had to kind of come up with great structure around making the decision about when the balloons can fly and how high they can fly. No, I'm a native New Yorker. So even as 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 chatting in this crazy season. Holiday shopping seems to kick in earlier each year. For Macy's, with the Thanksgiving Day Parade, the sprint to Christmas, it's like your Super Bowl.

3:44What's distinctive about 2025, about this year? I mean, the economic and shopping environment has been pretty chaotic. I think the news certainly makes things more complicated. I think people are confused. We had a terrific second quarter. We talked about the back-to-school business being pretty healthy. and yet we all see potential storm clouds on the horizon. So we're trying to be cautiously optimistic. 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 have to just really focus on making sure that you find those things at Macy's and Bloomingdale's and Blue Mercury.

4:32Yeah, I mean, the consumer behavior changes, they can be so hard to parse, right? And you've got, you know, supply changes and tariffs and sort of inflation and all those things. We don't always know how those things are going to impact. So you focus on what you can control. It is control of the controllables. And you could stay up all night worrying about the weather that we were talking about or what's going to happen with snowstorms in the fourth quarter. But in reality, our job is to make sure we create a better shopping experience for the customer. There's plenty of things that are out of our control that we could obsess about, but it really doesn't satisfy anything or make it feel any better.

5:16Yeah. And now for the parade, this is, if I have it right, this is the 101st year. So one past the centennial. So like, how do you keep it fresh following a big milestone? Well, it's the 99th parade, but the 101st year, because we did take a couple of years off during the Second World War. So making sure every year the parade has, again, newness. We have partnerships with Disney and we have Pokemon and we have this year new Pop Mart. So the boo-boos, we want to 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.

6:0232 million people approximately are going to watch it on TV, and we have several million more that come live in person in New York City on that day. Macy's has an iconic place in American culture, although obviously hasn't been immune to the challenges in retail. You launched what you call a bold new chapter after becoming CEO in 2024. It's showing traction in your financial results, but you're still sort of in the midst of it. What's working? What's not? What are you tweaking? Sure. Well, let me break it into the three parts. The first was strengthening and reimagining Macy's. And that included closing underproductive stores and betting on our future state stores.

6:49So putting more colleagues into the stores, putting new merchandise into the stores. After talking to 60 ,000 customers in 2022 and 2023 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 and doubled down on our luxury businesses, which include Bloomingdale's and Blue Mercury. So we've got three wonderful, iconic brands in the retail industry. How do we make sure we're getting our fair share of all of those businesses? And then the final part of the strategy is end-to-end operations.

7:22And that's making sure we're utilizing automation and robotics and AI and making sure the complexity that might exist in our business doesn't affect the consumer. So that speed of delivery, that's the efficiencies that we put in the back of house. I was actually talking to a CEO last week who said AI is like a drinking game. You have to mention it. Every time you say the phrase AI, you have to take another drink. Not all businesses are getting the AI payoff that they hope for. And I'm curious how it's going for you. We're putting pokers in the fire, which means it's not limited to one aspect of the business.

8:04But we want to make sure that we're partaking in trial and error and testing and learning in a multitude of areas of the business. So it's being tested in our supply chain. It's being utilized in our call center. We're experimenting and trying to improve our planning and allocation of inventory. We're using it in our HR function, in our marketing department. Is it something that I would say is scaled yet? Is it something that is transformational yet? No. But I think both things, this is the case of two truths. It can be that people are using the word too much and too often, and it will change our lives.

8:47So I believe both things are true, that we're still in the infancy of value added, but nor are we excluded from participating in this learning period as long as we don't overinvest. Yeah, I mean, it is tricky, right? Because there's so much, I don't want to say hype, but it feels like, oh, it's going to change everything. And I think we do believe that. But the time of when and where those things are going to 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 in the interim, how do you encourage your organization to have an open mind, to be experimental, to not lose focus from what problem you're solving for so we don't just adopt shiny objects that people show to us?

9:36But we really talk about the fact that, you know, we believe in humanity. So in my mind, 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. How do you think about that sort of in-person human interaction versus the digital commerce? 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 I don't think the word gets enough volume or credit. And in the case of digital shopping, of course, you know, everybody is going to do some level of digital shopping and people are also going to do in-person shopping.

10:25There's some reports out now that the next generation is in longing for socialization and in-person shopping is a big part of what they're doing together. The resurgence of not the bad malls, but the A malls. There is a place, I think, for 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. Digital shopping, sure, we do it. Physical shopping, sure, we do it. That's the balance that the consumer is looking for, where they actually decide what's right for them. I mean, I feel like it's gotten harder to get folks to bond with any IRL brands these days.

11:06You 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, is there going to be a remake of Miracle on 34th Street in the offing? Like, how do you think about, you know, about going beyond just the store to connect emotionally? So we agree with you. I think the parade, the fireworks, the flower show are all incredible, iconic events that allow us to transcend what is just transactional retail and allow the Macy's brand to live in people's lives. Almost 70 % of our business still remains in physical retail, which is very consistent with the industry averages.

11:47That doesn't mean we don't love our digital business. If we were selling paper towels, who wants to go shopping for paper towels? I'd like to have those delivered to my house 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 people show how to do flower arranging, you can get people to turn out to the stores because it becomes an extension of what they want to do for the weekend. What's the family going to 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.

12:25A bad or a mediocre retail experience, people can do digital. They don't need to exhaust themselves with that experience. But the bar keeps going up, right? It does, but so do the opportunities to leverage technology to improve the humanity that we provide. So we have traffic counters and conversion measures in every one of our stores by hour. So we know where we are undershooting and where we are overshooting the consumer. So if we need more people between 2 and 5 o 'clock on Saturdays, we're going to have more people between 2 and 5 o 'clock on Saturdays. If we have too much staffing on Monday mornings, we're going to try to reduce the amount of staffing that we have in our stores on Monday mornings.

13:08There is a piece of our business that is very much about Mary, you know, in Tyson's Corner or Sally 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. I want to ask you about planning and decision making in 2025. 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?

13:48Things are shifting so fast. You get new data constantly. I'm curious what you look at and how fluid you have to be with your plans. You have to be very fluid. I mean, to be candid in the age of tariffs and in the uncertainty of supply chains, plans are the guardrails. And the longer the plan, the less accurate it is. So you do deal with a rolling operating forecast, which is something that we update on a weekly and monthly basis. And that kind of gives us greater visibility into how to allocate inventory, how to plan our staffing, how to change our marketing so that we're doing it in real time, not based on some plan that we developed three or six months ago, which may at this point be somewhat outdated.

14:37I think we're on version number 27 of our forecast and plan because of the interesting environment that we're operating in 2025. Interesting environment indeed. Tony is looking on the bright side, even as he's 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.

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17:23Let's jump back in.

17:28I'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 first place. Like, are there things that you do that sort of feed your energy, feed your soul as you're running the company that maybe you could hand off to someone else, but you do because, you know, you just like it. It allows you to do everything else better. I'm sure if you talk to different functions in our company, they would say they'd love for me to spend a little less time in that function. But no, seriously, I love the marketing.

18:04I love the merchandise. I started on the sales floor, so I do enjoy the consumer interaction. I don't actually get to buy anymore. I don't actually get to decide what we're putting in our social channels. But I can be a great sounding board, and I can be someone who can help shape our priorities. What's your role when it comes to the Thanksgiving Day parade itself? Like, what do you do that day? Are you ever tempted to cast yourself as Santa? Stay out of the way. No, I arrive early. I participate in a little bit of media, check in on the teams, and I joke stay out of the way. But really, this is a wonderful craft.

18:46They spent an entire year getting ready for this parade. I'm a proud kind of, I would say father, but I'm proud of the team. Kind of when I look at what they've been able to accomplish, I'm an attendee. So I get to be able to clap and cheer along with other native New Yorkers. And then I can't wait to see the ratings to see how we did. And hopefully 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. Because it has felt very disruptive and chaotic. I was taught growing up in the business by mentors that I had.

19:31I was challenged to make sure that I balanced both self-awareness and ambition. People don't expect perfection. We're not unlike baseball or other sports where if we can do better than the average, if we can do better than we've done historically, we're going to be rewarded. celebrate small victories. I know it seems trite, but the day goes so fast. And with 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, a recognition of something done exceptionally well. I went to school for hotel and restaurant management, and we had a lab on food chemistry.

20:16And I love the class because there were seven different groups. Only one group had the right recipe for bread. Everyone else's loaves fell. 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 Meadows or Blue Mercury, we have to get the proportions right. Some things are icing. Some things are just designed to kind of like hit your sweet tooth. 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 colleagues, or that we take the time to make sure that we are connecting with consumers.

21:02There's a timelessness to the way you're talking about sort of what the needs are and what you're trying to meet. And I'm curious, you know, there's an analogy that people sometimes use that, you know, 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 wartime or peacetime, you know, and how would you cast yourself in that? That's a great question. I'd like to say it depends on the day of the week you ask me. And I think the challenge for our business is on Tuesdays, I might have to be a peacetime leader.

21:46And on the first day of 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 is a lot of wartime philosophy that I think you have to be able to deal the hand you're dealt. 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 decades, if not more. What matters tomorrow is going to be different than mattered yesterday. I use the phrase, graciousness and kindness the last time I check don't cost money.

22:23So 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. So what's at stake for Macy's right now? Oh, I think making sure that we turn the naysayers into believers. The advocate, I love. The critic, I welcome. 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 their advice. And then the advocates, we got to 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.

23:13And in other ways, it's kind of a miracle that with all the changes that have happened 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. 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 Bloomingdale's and Blue Mercury. How will people look at the time and the focus that we've put into these businesses to make sure that they're around in the future and that they mean something to the next generation of consumers?

23:54We 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 grew up with as well. And in a world where people question whether or not the department store is a viable concept, I ask people to suspend the word department store for a second and say marketplace. place. 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?

24:35I'm looking to be their favorite retailer. Well, Tony, this was great. Thanks so much for joining us and for sharing with us. Thank you very much for having me.

24:50Tony'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.

25:26I'm Bob Safian. Thanks for listening.

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