Macy's President Leaves as Company's Troubles Mount

The most worrisome element in Macy’s most recent quarterly earnings report was the fact that digital sales failed to grow at least 10% for the first time in a decade.

Macy’s president Hal Lawton, poached from eBay in 2017 to create an A-team and speed up the bureaucratic department store chain’s metabolism, and notably, take better advantage of its enormous e-commerce muscle, is leaving the company on December 6th, the retailer announced on Thursday. He will be the next chief executive of Tractor Supply Company, a company with a fraction of Macy’s revenue but worth more than double on the stock market.

As president, essentially the company’s second-in-command, Lawton has overseen all aspects of the Macy’s brand, taking on responsibility for functions like merchandising, marketing, stores, operations, tech, and consumer insights, and analytics. (Bloomingdale’s is part of Macy’s Inc but run as an independent company.)

For all its problems in stores, Macy’s is an e-commerce leader: it is the 6th largest U.S. e-commerce retailer, according to eMarketer, with annual digital revenue of about $5 billion. A big part of Lawton’s mandate was to build on that and better integrate e-commerce with stores.

There have been improvements on his watch. Those have included updating Macy’s mobile shopping app, improving search on its web site, and expanding the online-only component of the retailer’s merchandise assortment.

Most recently, Macy’s relaunched its same-day delivery after stopping the program in 2017 because products were hard to find on the web site. Macy’s chief product and digital revenue officer said at the WWD Digital Forum in September that since 2017, Macy’s had “made significant investments in new technology in our stores and on our website.”

Another big initiative under Lawton that has tapped into his eBay experience is the expansion of Macy’s Vendor Direct program, where many items are listed on the site but not sold at stores and go straight from the item’s brand to customers’ homes. There are now 1 million items on Macy’s site that fall into that category.

Yet for all those efforts, Macy’s comparable sales fell 3.9% in its most recent quarter, prompting the company to lower its full year profit forecast for the second time. It was that metric’s first decline in two years.

The disheartening results, in light of how well regarded Lawton is in the retail industry, suggest how hard it is turning out to be to fix Macy’s $25 billion business, even in a strong consumer spending environment. Macy’s is very dependent on apparel, has gotten its customers hooked on profit-eroding discounting, and has about 450 hundreds of stores in low-quality malls.

Despite the loss of an important executive, Macy’s CEO Jeff Gennette praised Lawton and said his departure would not change the retailer’s ability to navigate the holiday season. “Hal also helped us build an excellent team and, with their leadership, I’m confident that Macy’s will continue strong execution through Holiday 2019 and beyond,” Gennette said.

In contrast, Tractor Supply is thriving: revenue rose 6.6% in the first three quarters of the year (in 2018 revenue was nearly $8 billion), and its stock market value is $11.5 billion. Meanwhile, Macy’s revenue fell 1.7% in the first nine months of the year, while its stock, among the worst performers on the S&P 500, has dropped by half, leaving it with a market capitalization of $4.65 billion.

As for Lawton, who earlier in his career started Home Depot’s e-commerce business from scratch and made it a $2 billion business, he’ll get the chance to be a CEO of a large company in his home state of Tennessee. And he’ll get the opportunity to again build a hardware supplier’s e-commerce business with his experience, something Tractor Supply touted in its announcement.

Macy’s Challenges Get Tougher as Its President Exits

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