Tony Spring, Macy’s New C.E.O., Faces Retail Puzzle

As he prepares to take the reins as Macy’s chief executive on Sunday, Tony Spring has a tall order: He must contend with the existential crisis that mall-based department stores are facing to try to stay relevant in an increasingly e-commerce world.

But trying to infuse Macy’s with new ideas and win over the next generation of young shoppers shapes up as a long-term effort, and some investors have already lost their patience.

In December, an investor group submitted a bid that would take Macy’s private at a value of $5.8 billion. The investors, Arkhouse Management and Brigade Capital Management, say that unless the retailer begins sharing nonpublic information with them, they may take their offer to shareholders.

The firms’ bid puts even greater scrutiny on Mr. Spring as he takes over.

Mr. Spring, 58, has spent his career at Macy’s high-end store group, Bloomingdale’s. He started as an executive trainee in 1987 and rose through the ranks to become chief executive in 2014. During his tenure, he helped revive Bloomingdale’s cachet, bringing in hundreds of brands and emphasizing more appealing displays of merchandise and a creative marketing strategy. He turned the chain into a “scrappy incubator” for ideas that were eventually brought over to Macy’s stores.

Since March, Mr. Spring has been C.E.O.-elect of Macy’s Inc., which is the largest department store operator in the United States by revenue, once Bloomingdale’s and the cosmetics chain Bluemercury are factored in.

“Tony, I think, has done a better job, quite frankly, than the Macy’s organization has done in keeping their stores tuned into their customers and making the presentation sparkle, be enticing and making people want to walk to the store to get ideas,” said Allen Questrom, a former chief executive of Federated Department Stores, as Macy’s parent company was then known.

But bringing change at the corporate level will be a different task from running Bloomingdale’s.

Macy’s has a broader customer base than Bloomingdale’s and skews less to luxury goods. Macy’s roughly 560 stores are spread from its crown jewel location in Manhattan’s Herald Square to dying malls scattered across America’s smaller towns; Bloomingdale’s has about 60 locations. Half of Macy’s customers have a household income of $75,000 or less, while Bloomingdale’s, whose big brown bags had long been a status symbol, draws shoppers with higher incomes.

In the past decade, there has been considerable consolidation in the department store sector with the fall of Sears, Barneys and Lord & Taylor. Of the remaining chains, Macy’s broad store base poses a unique challenge, retail and real estate analysts say. Macy’s is more dependent on malls and has had less success than Kohl’s and Nordstrom in defining what sets it apart, said David Silverman, retail analyst at Fitch Ratings. Macy’s also has increasing competition from discount chains like T.J. Maxx and Burlington.

“Macy’s continues to be the most average department store,” Mr. Silverman said. “It’s the most exposed to competitive incursion from the off-priced channel. It’s the most exposed to traffic declines across many regional malls.”

It has also had a hard time winning over Generation Z, a cohort that is coming into its spending power and is more accustomed to shopping on phones than in malls. The company has been opening smaller-format stores in recent years, like Bloomie’s and Market by Macy’s, and plans for more openings through 2025.

Department store operators have long been a target of so-called activist investors and private equity funds, which often aim to milk a retailer’s real estate for cash in ways that traditional management may resist. The cash from selling the properties can be a quick way to pump up a company’s shares, but it also leaves a retailer paying rent to the new property owners, and those payments can become onerous.

Arkhouse and Brigade have offered to buy the Macy’s shares they do not already own for $21 a share, a 32 percent premium to the price before news of their offer broke. They say that due diligence based on the information they are demanding from Macy’s could allow them to bid even higher.

Macy’s has questioned whether the investors have sufficient capital — or will be able to acquire it — to fund the deal. In a letter sent to Arkhouse and Brigade, the department-store chain indicated that it was open to other prospective offers. The letter was signed by Jeff Gennette, Macy’s departing chief executive.

Gavriel Kahane, a managing partner at Arkhouse, told Bloomberg that its investor group had “multiples” of Macy’s full value “in readily available funds to complete the transaction.”

The bid is “very undervalued for what the company is worth,” said Mr. Questrom, the former Federated chief. But “if Macy’s doesn’t make strides in the future,” he cautioned, the offer will prove overpriced.

The bidders have not laid out their plan for Macy’s, but many analysts say they believe the investors would try to monetize the department store chain’s real estate.

The most notorious retail deal gone wrong may be Sears, which the billionaire Eddie Lampert bought and merged with Kmart, betting in part on the prime value of the latter’s real estate. The company filed for bankruptcy protection in 2018, after its debt payments left it short of cash and unable to invest in its stores.

Retailers have seen lessons in the Sears debacle, along with the bankruptcies at J.C. Penney and Toys “R” Us after ownership shake-ups. The founding family of Nordstrom walked away from an attempt by the private equity firm Leonard Green to buy the retailer in 2018. And Kohl’s rebuffed two takeover bids in 2022.

But for shareholders, the path has been rocky. Over the past five years, shares of Nordstrom and Kohl’s have dropped 60 percent, while Macy’s shares have declined 28 percent.

With the retail industry facing persistent difficulties in adapting to rapidly changing shopping trends, the question is “how do you manage that current trajectory most effectively for all stakeholders,” said Michael Dart, a retail strategist who has worked at private equity and consulting firms.

Macy’s has said it will unveil its latest strategy in the near future. In the meantime, Mr. Spring has already started attaching his name to recent changes. In January, in a memo to employees that was signed by both him and Mr. Gennette, the company said it would cut about 2,300 jobs, or 13 percent of its corporate work force, as it looked to better align its resources with customer behavior and to make decisions faster. It also said it would close five locations.

To some, store closings and job cuts sound like an old playbook, and potentially detrimental to the store experience. In early February 2020, Macy’s announced a restructuring that focused on closing nearly a quarter of its stores over three years and cutting 2,000 jobs. Weeks later, the Covid pandemic caused stores to go dark. As stores reopened, said Azia Domingo, who has worked in Macy’s stores for 21 years, staffing became even thinner. Shoppers often complain on social media about how hard it is to find store workers.

Ms. Domingo, a member of UFCW 3000, a union representing about 400 Macy’s workers in Washington State, said the recent corporate layoffs had caused some store employees to worry about their own jobs. She called the job cuts “scary and stressful” and said she hoped that Mr. Spring would invest in stores and workers’ salaries.

As he prepared to turn over the top job, Mr. Gennette praised Mr. Spring’s “clear vision, deep operational experience and strong leadership abilities,” as well as his “innovative brand-building and talent-development skills.”

What Mr. Spring learned in his decades at Bloomingdale’s will now be tested at a new level.

“He’s a good merchant, and I think that always makes for a good leader,” said Liza Amlani, founder of Retail Strategy Group, which works with brands on their merchandising and planning strategies.

“I think that’s going to translate well for Macy’s,” Ms. Amlani said. “But that’s not the only thing that Macy’s has to solve.”