MARIA: WE ARE BACK WITH FORMER
MACY'S CEO AND CHAIRMAN TERRY
LUNDGREN.
YOU HAVE MADE SOME COMMENTS IN
THE PAST ABOUT BRICK AND MORTAR
STILL NEEDING TO GET SMALLER, IN
TERMS OF CAPACITY, REAL ESTATE.
YOU THINK, WHERE ARE WE IN THAT?
>> WE ARE A LONG WAY FROM
GETTING THE SUPPLY AND DEMAND
BACK IN LINE.
MARIA: TOO MUCH CAPACITY?
>> TOO MUCH CAPACITY.
PHYSICAL SPACE, THERE'S TOO MUCH
INVENTORY IN THE SYSTEM AND THAT
THE ONLY WAY TO GET RID OF IT IS
MARK IT DOWN.
THAT BECOMES AN OFF-PRICE ISSUE.
MACY'S TOOK THE POSITION A
COUPLE YEARS AGO WHILE I WAS
THERE TO REDUCE 20% OF OUR
STORES.
POSITIVE.
WE GOT RID OF ALL THE BAD STORES
A LONG TIME AGO, OVER TIME, BUT
THIS WAS A BIG DECISION.
BUT WE KNEW THAT JUST WATCHING
THE CURVE THAT THE STORES WERE
YOU'RE NOT GOING TO BE PROUD OF
THOSE STORES.
IF YOU'RE NOT PROUD OF THOSE
STORES, YOU WON'T BE ABLE TO
KEEP THE SELLING TEAM THAT'S SO
VITAL AND SO IMPORTANT TO THE
CONSUMER IN THOSE STORES.
YOU KNOW, WE HAVE TO GET IN
FRONT OF IT AND RATIONALIZE THE
IT WAS THE RIGHT MOVE.
MARIA: LET'S TALK DEMAND.
DEMAND HAS BEEN GOOD.
BACK TO SCHOOL, HOW DO YOU
CHARACTERIZE IT?
>> VERY GOOD, SO FAR FROM
REPORTS THAT I HAVE SEEN, BACK
TO SCHOOL IS VERY POSITIVE.
THAT'S GENERALLY A GOOD
INDICATION FOR HOLIDAY SALES.
WAS TEN YEARS AGO.
BUT WHEN IT WAS MUCH MORE OF A
DIRECT CORRELATION.
BUT HAVING SAID THAT, YOU
DEFINITELY WANT TO FEEL LIKE
YOU'VE GOT MOMENTUM GOING IN
BACK TO SCHOOL AS YOU ARE BUYING
FOR YOUR HOLIDAY SEASON.
MARIA: DOES THE BACK TO SCHOOL
GIVE YOU AN INDICATION OF WHAT
IS THE HOLIDAYS, CHRISTMAS?
>> YES.
IT DOES.
AS I SAY, IT'S NOT AS, YOU KNOW,
WAS.
IT'S DEFINITELY A POSITIVE.
BECAUSE THAT GETS OUR BUYERS
SKITTISH ABOUT BUYING FOR THE
HOLIDAY SEASON.
I THINK WHAT YOU ARE SEEING
QUARTER.
MARIA: YOU GOT A 4.1% GDP FOR
WE ARE EXPECTING 4.3% FOR THE
THIRD QUARTER.
TWO STRAIGHT QUARTERS OF 4%
GROWTH POSSIBLE.
IS THIS SUSTAINABLE?
>> I THINK SO.
MARIA: THE WAY THE CONSUMER
FEELS TO YOU TODAY, YOU THINK
THAT'S SUSTAINABLE?
>> YEAH.
CONSUMERS IS THE RIGHT WORD,
RIGHT QUESTION, BECAUSE 70% OF
GDP GROWTH IS DRIVEN BY
CONSUMPTION.
SO WE JUST NEED TO MAKE SURE
NOW, SIX MONTHS FROM NOW, NINE
MONTHS FROM NOW.
ALL OF THESE INDICATIONS OF
CONFIDENCE THAT ARE THERE TODAY
NEED TO REMAIN --
MARIA: HOW SENSITIVE YOU THINK
THE CONSUMER WILL BE OF HIGHER
INTEREST RATES?
WE HEARD FROM POWELL ON FRIDAY,
THEY HAD THE JACKSON HOLE
MEETING.
WE KNOW THE FED WILL PROBABLY
RAISE RATES IN SEPTEMBER.
DO YOU THINK THAT A STEADY SORT
OF SLOW BUT STEADY MOVE IN RATES
IMPACTS, CHANGES IT FOR THE
THE BASE.
WE ARE AT 2% INTEREST RATE.
IT'S NOT LIKE WE ARE AT 8% GOING
TO 9%.
WE ARE AT 2% INTEREST RATE.
WE ARE AT RECORD LOWS.
I THINK FROM THE BASE WHERE WE
BEGIN, THIS IS MUCH LESS OF AN
THE INCREASES THAT THE FED HAS
IN STORE, WHATEVER THEY MAY BE.
WHAT THEY'LL DO BUT THAT'S WHAT
THEY'VE SIGNALED.
I THINK IF THEY'RE AS MODEST AS
THEY'RE AS MODEST AS THAT, THE
ECONOMY CAN CLEARLY HANDLE IT.
MARIA: ONE OF THE THINGS THAT
HAPPENED ON YOUR WATCH, UNDER
YOUR TENURE, IS THE ENTRANCE OF
AMAZON.
>> YES.
DIDN'T IT?
TELL ME HOW YOU DEALT WITH THIS
NEW SMALLER ENTRANT IN THE
BUSINESS, WHAT YOU DID TO CHANGE
TO GET MACY'S AS STRONG AS YOU
COULD.
>> SO THE GOOD NEWS WAS FOR
MACY'S, MACY'S BEGAN THEIR
MACY'S.COM WEBSITE IN THE LATE
TURN INTO AN ONLINE BUSINESS.
BY 1999 AND 2000, WHEN ALL OF
THE DOT-GONE ERA --
MARIA: DOT-GONE.
>> MANY COMPANIES THESE PEOPLE
HAVE FORGOTTEN ABOUT THAT WERE
RIDING HIGH AT 50 OR 80 OR 100
MULTIPLES, THERE WAS REALLY NO
MULTIPLES BECAUSE THEY WEREN'T
MAKING ANY MONEY.
>> RIGHT.
THEY GOT WIPED OUT IN '99, 2000,
WHICH WAS UNFORTUNATE FOR MANY
BUT IT WAS THE RIGHT THING
BECAUSE YOU BEGAN TO HAVE TO
HAVE A BUSINESS MODEL THAT COULD
ACTUALLY PRODUCE EARNINGS FOR
SHAREHOLDERS OVER TIME.
SO WHEN THAT HAPPENED AND
EVERYTHING SORTED ITSELF OUT IN
THE ONLINE WORLD, MACY'S WAS
ALREADY IN POSITION TO STAY WITH
IT.
AMAZON OBVIOUSLY DID SOME VERY,
VERY GOOD THINGS.
I THINK THE BRILLIANCE OF AMAZON
IS THEIR NON-RETAIL BUSINESS.
THEIR CLOUD SERVICES, THEIR
DISTRIBUTION, THEIR LOGISTICS.
THEY ARE DOING UNBELIEVABLE IN
ALL THESE PLACES WHICH FRANKLY
ALL THESE PLACES WHICH FRANKL
THAT IS FAR LESS PROFITABLE FOR
THEM THAN THESE OTHER
BUSINESSES.
I THINK THEY ARE ACTUALLY QUITE
BRILLIANT IN THIS REGARD.