Amid a prolonged stretch of sluggish sales, Macy's announced on Thursday that its president Jeff Gennette, who has spent 33 years at the company, will assume the role of CEO in the first quarter of 2017. Gennette was previously elevated to president in 2014.
Gennette will take the baton from longtime Macy's chief Terry Lundgren, who helped create the modern-day Macy's and has been its CEO since 2004. Lundgren will continue to serve as executive chairman.
"I have been the CEO of Macy's for 13 years, and by the time I turn it over to Jeff next year it will be 14 years, and I will be 65 years old. How many CEOs of Fortune 500 companies do you know have been around for as long as I have? I would say very, very few," Lundgren told TheStreet in an interview.
Added Lundgren, "We have planned this for over two years when we made Jeff president of the company. It was all part of our succession plan."
Lundgren said he will stay on as executive chairman for as long he could be helpful to Gennette and the company.
TheStreet talked with Lundgren and Gennette to discuss the transition process that has now been set in motion, as well as Gennette's vision for Macy's. What follows is a condensed and edited version of our conversation.
Lundgren has built the modern-day Macy's.
TheStreet: The announcement is sort of a surprise, no?
Lundgren: I have been the CEO for 13 years, by the time I turn it over to Jeff next year it will be 14 years and I will be 65 years old. How many CEOs of Fortune 500 companies do you know that have been around as long as I have? I would say very, very few. I have had a phenomenal experience and run here, in particular the five years prior to this past one, but really all throughout my career.
I'm feeling great about my ability right now to hand over the reins to Jeff in the first quarter. It honestly will go down as one of my greatest accomplishments in being able to give the CEO title to Jeff and do it in such an orderly way.
We planned this for two years when we made Jeff the president of the company. It was all part of our succession plan.
TheStreet: What do you see yourself doing in 2017 after the CEO transition is complete?
Lundgren: My No. 1 priority is I will be executive chairman of the company for as long as I can be helpful to Jeff and the board of directors. I will help Jeff through the transition and help us become the most successful retailer in the country. I think because of my tenure and unique amount of experience that I have had in this seat -- I have seen a lot of variations to consumer interests and challenges -- that I can be helpful to Jeff during the transition.
TheStreet: What is Terry Lundgren's legacy?
Lundgren: The merger between May and Federated was very transformational, no question about it. We made a major impact on the department store industry.
But I will you that my legacy is surrounding myself with very talented people throughout my career and always recognizing that you can't do things yourself. You have to understand that there are people who are going to be in specific functions that need to be experts at certain roles and need to be very talented and collaborative. If I have done anything better than other things, it has been surrounding myself with very talented people such as Jeff and CFO Karen Hoguet.
I think I have assembled, motivated and retained an incredibly talented team.
Current Macy's President and soon-to-be CEO Jeff Gennette.
TheStreet: You noted in the press release announcing the decision that Macy's will need to be a significantly different retailer in the future. What did you mean by that?
Gennette: We started about 10 years ago on this journey to be the best possible omnichannel retailer, and we are not done with that yet. I would tell you there are certainly some secular challenges that are new to us. We certainly have online players -- Amazon (AMZN - Get Report) leading that list -- and others taking some market share. We also have an off-price channel that has been ferocious. You also have fast fashion that has been quite strong.
Through all of this it makes us more and more convinced that by having our focus on the customer and how she shops, that we have unique assets that can better touch her than some of those other competitors. We just have to continue with all of the work in our journey.
TheStreet: Can you share some specific changes you would like to make?
Gennette: We are not yet ready to announce big changes because the strategy that Terry [Lundgren] laid out in terms of mobile, omnichannel and improving our in-store experience are all things that still apply today. We just have to continue to improve on them and also look at big opportunities to address the secular changes. But, here are a few examples of opportunities.
We have an opportunity to get better in our stores. So we know that the customer is demanding a level of experience today that she didn't in the past, and how we deliver that to her is going to be important. Our stores are a real focus right now.
Second, we really know that when you think about the friction points that exist in her shopping journey -- for instance when we don't have something in stock or the price in the store is not comparable to online -- those are things that we are really obsessed with right now.
Then, another focus is understanding what Macy's is unique for. We have a lot of great assets that you are going to see us amplify. We have a great team of merchants that work at our company, vendors we work with and lease partners that belong in the Macy's tent to satisfy our customer's needs.
The rise of digital shopping has helped, and hurt, Macy's.
TheStreet: How are you different than Terry Lundgren in terms of management style?
Gennette: We are philosophically very similar, which serves us well. Whatever gaps Terry and I have in our individual portfolios we surround ourselves with talent to cover that. Neither Terry nor I operate from a position of arrogant thinking. So, I know what my shortfalls are, and I have a deep respect for the talent that I can assemble.
I have had the pleasure of serving with Terry and the talent he has assembled. So I look at him as a role model.