Macy's (M), seeking to reinvent itself for the modern shopper, announced a change of leadership Thursday that it hopes will help usher along its transformation.
CEO Terry Lundgren. who has held the post for 13 years, will step down next year, handing over his post to President Jeff Gennette early next year. .
Lundgren will stay on as executive chairman of the department store company, which also operates Bloomingdale's.
The announcement comes amid tumultuous times for Macy's, which has been chasing a leaner business model through store closures and job cuts in recent years. Department stores have been hurting at a time when their vast sales floors and huge selection of goods have come to be seen as overwhelming and unnecessary.
"Now is the time to reset our business model," said Lundgren in a statement "Our company must and will change in response to the profound secular forces that are driving consumer spending."
The executive shakeup is significant for the country's largest department store chain, which ended 2015 with $27.1 billion in sales. The company operates about 870 stores in 45 states, between its Macy's, Bloomingdale's, Blue Mercury, outlet and off-price stores.
But one of the icons of American shopping has seen a loss of shoppers to newer stores like H&M and an endless array of online shops. Macy's has experienced five straight quarters of same-store sales declines, which it blames in part on a drop in tourist spending. Its stock, on a steady rise since the recession and peaking last summer at $70.27 a share, has since fallen by 53%. The company closed 41 under-performing stores last year and has slashed thousands of jobs as it has attempted to pare down operating costs and become more competitive.
Part of the changes already underway under Lundgren include opening the off-price Macy's Backstage stores last year and expanding the availability of services such as same-day delivery and being able to buy online but pick up items in a store.
Now, 55 year-old Gennette will spearhead Macy's transformation going forward. He has been with the company 33 years, starting as an executive trainee in 1983. He became chief merchandising officer in 2009 and was named president in 2014, sparking speculation that he would eventually succeed Lundgren.
Gennette forecasted changes to come, but didn't give details.
"There is no doubt that Macy's, Inc. will need to be a significantly different retailer in the future in the way we operate and approach the marketplace," Gennette said in a statement.
The leadership shake-up could mean that Macy's will move more quickly to monetize its real estate portfolio, which it has been considering for months without making any definitive agreements.
"They have a decision to make: Do they want to monetize more of their assets and focus on the retail business itself?" says Efraim Levy, S&P Global equity analyst, adding that Gennette may be more open to the idea.
As a longtime Macy's insider, Gennette's appointment has the benefit of elevating an executive who knows the company well but the downside of potentially promoting the status quo, Levy says. "It's easier to make dramatic changes when it's someone else doing the change," he says.
During his CEO post, Lundgren oversaw the acquisition of the May Department Stores Company in 2005, doubling the company's size and rebranding under the Macy's name.
He also steered Macy's through its lawsuits against Martha Stewart Living Omnimedia and J.C. Penney over rights to sell Martha Stewart-branded home merchandise.
Before becoming CEO, Lundgren was chief merchandising officer of Federated Department Stores, which is now Macy's, and previously served as CEO of upscale department store chain Neiman Marcus.
