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Macy's business gets healthy after New Crown pneumonia outbreak?

Last year's New Crown pneumonia epidemic may have put some headwinds on Macy's best-laid plans for a turnaround, but CEO Jeff Gennette appeared undaunted during a video keynote at the National Retail Federation (NRF) on Thursday.

"2020 is an unprecedented year," he said. "I think the title (of today's speech) is that Macy's is a healthier business after coming out of the New Crown pneumonia epidemic."

Of course, the extremes brought on by the outbreak have led many companies, including Macy's, to cut operating costs in what might otherwise have been an even more embarrassing position.

Macy's cut nearly 4,000 employees last year and in doing so saved about $630 million a year, including $365 million in the last fiscal year alone. Jeff Gennett said at the time, "We know that our company will shrink further in size for the foreseeable future."

Macy's began executing plans to shrink the size of its shops long before the New Crown pneumonia epidemic, due to new challenges and opportunities in brick-and-mortar retail.

Jeff Gennett noted, "While we are reducing our shop size, we are on the other hand growing very quickly and focused on our digital shopping business.

As an omnichannel brand, we are focused on how we can best meet the needs of our customers in terms of digital shopping.

During the Newcastle pneumonia outbreak, Macy's responded quickly to the challenges posed by the outbreak, including adjusting its merchandise assortment when physical shops were closed and advancing its omnichannel delivery services.

Implementing a range of measures to ensure safety when shops reopened. In this way, we're using data analytics to really adjust our merchandise, and we're just moving forward faster than ever, and our speed of response and adjustment is going up."

Kristin Bentz, president of KB Consulting Group, said Macy's may now benefit from the huge investment in technology made 20 years ago. But she notes that Macy's would be wrong to think that its digital business can rely on the brick-and-mortar glory of the past, especially as in-store shopping comes back into vogue. The Macy's store is now a major player in the digital industry.

"How do the shops look and what is the service like? You know, the Macy's shop still looks miserable, the assortment is terrible. The shop is sparsely staffed with attendants and you can't get anyone to help you. It's like a ghost town," she said.

"They're dancing on a cliff, and if they want to survive they really need to take one step at a time from a sales perspective on their feet. Digital alone is not enough to keep Mersey & Co. afloat until the new pneumonia epidemic hits. They will have to be smart about reaching success in both digital business and brick-and-mortar retail.

Several analysts, including Kristin Bentz and Neil Saunders, Managing Director of GlobalData, noted that the US economy is recovering, consumer confidence is growing and widespread vaccination, among other factors, is boosting the entire retail industry, and Macy's will Macy's will benefit from this.

Neil Saunders noted that Macy's has a good platform, is focusing on advancing its online presence and is realigning its product categories, which makes them stronger than ever.

"I would say, however, that there are many potential structural and operational challenges for Macy's to address beyond how to grow the Macy's brand to stay relevant. These things will become more apparent when the wave of high spending stops, and they remain a threat to Macy's long-term growth."

Leading US department store chain Macy's is expanding its in-store, low-cost shop-in-shop concept called Backstage.

Neil Sanders said, "While Jeff Gennett's speech was uplifting, Macy's management does have a habit of making exaggerated statements that border on being overly optimistic. Everyone understands that they want to sell a positive story to investors, but I also hope they understand the serious task ahead of them and don't get complacent."

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