Miracle at Macy's

in financial trouble. Let's grab a cup of good cheer and find out how this company fought its way back through the blizzard of bankruptcy and a changing marketplace. Like a Rudolph led sleigh, this is Macy's on the brink. Earl, you really did yourself writing that intro. This time I could tell you loved it. Jonathan. I got got a little heavy handed with the Rudolph. But today we're going

to talk about Macy's and really it's funny. We were looking over this aerial while you were doing your research. You saw that Macy's actually has a lot of different moments in its history that we could define as a potential brink. Yes, we are specifically looking at a time that started kind of in the mid eighties and went into the early to mid nineties. That was the real

brink that we're focusing on. But we're gonna give an overview of some other stuff with Macy's too, just because you know, it's good to have a basic understanding of the subject before you get into like and here's where it all went roll. Yeah, and I mean specifically for this story. It's actually the story of a bunch of department store conglomerates who are all kind of buying to buy the most stores to bring into their giant blob of department stores. Yeah. It's almost a I'm going to

buy you before you buy me kind of story. Yes, And it's so interwoven that if you go to the Macy's website and you look their history, which of course I did, half of their history talks about like the Federated Department Stores or may Department Stores Company, which are the other two major major players in this game. We're trying to focus mainly on Macy's history, but they are

a part of it. Yeah, So before any of them became a part of Macy's history, the company itself can trace its origins back to a fairly modest beginning all the way back in the nineteenth century, the eighteen hundreds, that's when you had the founder R. H. Macy. Yes, and Macy's what would become Macy's was not the first company or business they tried to open. He had tried to open a series of dry goods retail establishments. Yes, and I think also possibly like a sewing store or

something like that. Yeah, but um, they didn't work so good. A lot of his businesses went belly up, much like whales. He used to hunt because he was a whaler and he was also heard of the gold Rush, so he was a prospector and a whaler. And then he starts opening up dry goods stores in New York. So really we're looking at New York City eighteen fifty eight and the event that would lead into the opening of the

first Macy's. So this was a little bitty dry goods store and it actually started in have Her Hill one and then it went okay but not great. Yeah, it was it was the one that went okay instead of bad. So then he said, I'm gonna go to New York City and I'm going to open this big, fancy department dry goods store. Yeah, it's New York City, where folks

know what dry goods stores are supposed to be. Like, he opened up R. H. Macy and Company, and Uh, just looking over the history, one of the history points that I I thought was funny is that on the very first day of sales, the company made a whopping eleven dollars six cents. So that was just the first day. However, the first year was a different story. Things went pretty well. Yeah,

they made eight five th dollars. They spent that on marketing. Uh, and then they expanded their store into eleven adjacent buildings and also expanded out from dry goods and they became one of the first department stores. Yeah. So this is a special time in American history that that transition from the local dry goods store into the larger department store, which was kind of the evolution of that type of retail. And Macy's would end up being a pioneer in many

ways beyond this large expansion into eleven buildings. Yeah, he instituted a lot of firsts into his company that other companies use nowadays. So he was the first institute one price. Prior to this time, most stores you'd go in and you taggle and he put the prices, those single prices in his paper ads so that people could say, Oh, this is how much money I need to save to go buy this item that I want to buy. They also, for a long time only did cash buying and purchasing,

both on a store level and on a customer level. Nah, so they wouldn't do credit at least at first, not not for many many years. Uh, they gave money back guarantees. And another big, big first, he was the first to promote a woman to executive levels. So Margaret Getchell became the store superintendent for Macy's. And a little bit more about Getchell. She's very very important in the history of Macy's for multiple reasons. First of all, she gets a

lot of credit for helping the store succeed. She was there to originally be a cashier and do some bookkeeping, but she was also a very savvy businesswoman, and she helped make decisions, including marketing decisions that guided the store to those early successes. And so a lot of different sources talk about Getchell being an instrumental figure in the early days of Macy's. She was also distantly related to macy She was essentially a cousin to him. And also

she had lost an eye, so she was a one woman. Yeah, she had been a teacher, but she apparently agreed to go and work for macy because she figured it would put less strain on her one remaining eye. And she also is the one who convinced Macy to adopt the logo for the store, which is a star logo. And where did the star logo come from? Ariel Christmas time? No, it did not, you know where it came from. I know. It's actually a tattoo he had on his arm back from when he was a whaler. It was like the

star that guided him home. Yeah, so it's I just like the thought that one of the famous logos from retail history has its history itself tied into a tattoo. Well, since you stomped on my holiday cheer just a second ago, even though it was wrong, m I'm going to bring it back. Some other first that Macy's had. They were the first to feature Santa Claus Santa Claus statue in eighteen sixty two, and they were the first to have the big old fancy window displays in eighteen sixty four.

And they were the first retailer to get a liquor license in New York City after the prohibition. But they were also the first one to get a liquor license in New York City at all from retailers. So if you look at the retail store liquor licenses, Macy's is number one. They number their liquor license. Macy's was the first retailer to get a liquor license in the city of New York. They used to sell wine and liquor. We'll talk a little bit about that in just a second.

But then they also set some firsts that I'm sure thrilled customers and filled employees with dread. Yes, in eighteen sixty seven, they became the first store to stay open until midnight on Christmas Eve. So when you realize, oh no, I forgot to buy a gift for the wife, you could go to macy So if you're driving to Macy's on Christmas Eve at midnight, right now, we're with you. In eight seventy they hit a million dollars in sales.

That's that's a good annual sales figure for eighteen seventies, Yes, it is. And in eighteen seventies seven R. H. Macy passed away, he handed the store over to able To la Forge and Robert M. Valentine, who are partners and also extended family, and they took over Macy's. Did have a son, but he didn't have any interest in continue business. Yeah. So LaForge was Margaret Gretchel's husband. He had started as a buyer for Macy's and she married him, so he

was that since a part of the extended family. He would pass away in eighteen seventy eight, just a year after Macy did. He had tuberculosis. Gretchel would follow in eighteen eighty out of from heart congestion mainly, but Valentine would oversee the store at least until eighteen nine five. And that's when a different family would step in. Yes, the Stress Brothers is a door in Nathan and their dad. Uh.

They had been leasing the basement of Macy's already. They had been bringing a lot of success to the store themselves, and they were also the ones who created the China department for Macy's. Yeah, so they already had a stake in the store at this point. Now they did a first they started the odd price policy quote unquote, yeah,

you walk in, Hey, that door knobs dollars. That's strange. No, it means that instead of having a four dollar item, you're gonna have a three dollar nine cent item, so that if you buy multiple items, like if you say, buy five towels for now, you save five cents. Yeah, this is one of those things that that is a

psychological tool. And it's funny because we now see it all the time, right, this is you see ninety nine and it plays that little bit of a psychological trick on us as well, because you sit there and think, oh, that's less than the next number up, and you feel like you're saving at that moment. Now to me, it seems like that would make a bigger difference back then, because a penny went a lot further. They then moved

the store in nineteen o two. It had outgrown it's eleven building, large area, and they moved to thirty four and Broadway right. And then, sorry, I was just taken back by how you said that it was beautiful. I was having a producer's moment, and that was that was a big building, nine story building, so very tall building. It's not as tall as what Macy's would later inhabit,

but yes, and according to your research. If you were to go to that building, you would see some of the original work still there, like some of the originals. They still have some of the wooden escalators that were from the original. In nineteen eighteen, they made thirty six million dollars in annual sales. That's a lot of money back then, a lot of money right now, Yeah, I would not turn my nose off. And then in nine two they went public and they started acquiring regional stores.

So this is where we start seeing them branch out from being a New York based department store and they start creating what would eventually become a chain of stores. Nineteen twenty four we see the start of what would become an annual tradition. One of the big ones, although it was on a different date in nineteen that would be the Macy's Christmas Parade, now known as the macy Sanksgiving Day Parade. Now. I used to watch the local

one in Atlanta and also the one on TV. People attended the first one and they had all of these like animals and fun thing it was. It was very different then. It was more like almost like a traveling circus type thing, and the parade was actually organized by the employees. It was wrought to life by the employees of Macy's wanted to celebrate their American heritage. Now it's a much, much, much larger production that involves people from all over the world, not just the United States. It

also gets people hyped for the beginning of the shopping season. Yes, that's the biggest purpose exactly, kind of like, alright, now, everyone come inside and buy your stocking stuffers. Uh. Then one we would get some leges lation that would affect Macy's, the federal Fair Trade Law, which meant that there had to be specific minimum prices in retail for certain suppliers. And this was to help stabilize the economy during the depression.

So certain retailers and certain suppliers had you keep a minimum price, Like, they couldn't go below a minimum price. You couldn't suddenly have like a price war going below a certain because the federal law mandated that they be at least this much. Yes, so Macy's couldn't be undersold. And they were such a large company that they could, much like Walmart or Target, keep that bottom price. So then you have this wonderful little note here about Fred

Lazarus Junr. In nineteen thirty nine. He was the owner of Federated Department Stores. We talked about that a couple of times, the holding company that owned other department stores.

He is the person who chatted with Roosevelt the President, about making just a little minor change in the calendar, because up to that point, Thanksgiving was always the last Thursday of November, and they decided that maybe we could bump that up one week to be the second to last Thursday in November because that would give us more time between Thanksgiving and Christmas to sell things. Yeah, but this change helped all the retailers. Yeah, So it wasn't

just Federated Department Store saying we want to get ahead. Yeah. I mean they couldn't say, like, can you make Thanksgiving a week early but only for us? Yeah. In Macy's purchased some stores in California O'Connor, Moffit and company to expand westward, Yeah, and convert them over into Macy's department stores. And in those stores in California they did their first Macy's department store Flower Show. Now a movie comes out,

and one movie came out. A specific movie came out that has to do with Macy's and you already alluded to it. Yes, yes, Virginia talk about Miracle on thirty fourth Street. Miracle on thirty fourth Street. It's about a Macy's department store, Santa. It was a little bit magical.

And in the movie, he tells some customers to go for to Gimbal's because Macy's is out of stock of an item, but Gimbal's might have it, And that created such goodwill for the company of Macy's that more people wanted to shop at Macy's because they were looking out for the customer first. And that's what happened in the movie. And in the movie, Gimble and Macy become friends, even though macy was dead by that time. It was hard

to be friends. I mean maybe it as a zombie, yeah, But but this whole like idea of friendship, and this whole movie helped both stores for many, many years with their holiday sales. In the nineteen fifties, Macy's would finally start issuing credit accounts, no longer taking cash only, although it would benefit you if you stuck with cash, yeah, if you charged six percent last yeah. And then nineteen fifty two they hit a little bit of a snag

because that was when the federal fair trade law was overturned. Yes, so now it was fair game for undercutting prices. There wasn't price fixing to keep Macie's safe in the market, and so they had to of course compete with all these people who could have lower prices, and they posted

their very first loss that year. Now they had a subsidiary, Bamburgers, who instead of like trying to cut and buy cheaper things and lower prices, bought a bunch of top the line goods and made all these lavish displays, and people really liked it as kind of a specialty store. So Macy's actually made a good bit of money from them. Interesting, So yeah, almost going the opposite direction there. But they also started looking at some of their departments that weren't

being particularly productive. They were kind of being seen as a drain on resources, so they started consolidating and getting rid of departments. Yes, okay, so in nineteen seventy six they got the seller. It was literally the bargain basement of Macy's. So this is where people could go and buy super discounted items or last run items, things like that.

And then in seventy nine, they axed their liquor and wine department that we talked about earlier, but this was apparently something that had been going on in New York City for a while. Other retailers, we're getting out of that. According to Macy's, it was because men's were needed more space. Maybe men were putting on more weight or more close yet, maybe they were cold. But the scuttle butt was that the department had actually been unprofitable for twenty years, and

so they finally pulled the plug on it. And then in the nineteen eighties, and we're finally getting to the brain here, they started opening up specialty stores. In nineteen two, Macy's taught the industry in profit per square foot, and in eighty four they hit over four billion dollars. But while four billion dollars in eighty four is a huge amount of money, they were right around the corner from hitting a really rough time. And we'll plane exactly what

happened in just a moment. All right, So eighty four Macy's has a banner making year, right, they make four billion dollars in sales. But the hits and the economy starts to slow down, and as a result, people have less money to spend on shopping and fewer people are coming in and buying stuff at Macy's, which means Macy's sales slowed down. So now they're finding themselves with too much inventory and they had to keep dropping their prices

in order to just move product. And they still did okay in eighty five, but it was a drop in their trend and it was causing a drop in their stocks. And this made executives at Macy's worried that federated department stores are made. Department store company was going to come in and try to take them over, because now they might be showing a week. Yeah, so some of the executives are bailing out. The stock prices starting to drop.

This is one of the issues of being a publicly traded company, obviously, is that you have shareholders to answer to. So one solution to this problem is, well, what if we just buy up all the shares of stock and turn the company private again. So Ed Finkelstein, the president of the flagship store, led a buyout with all the other executives or a lot of the other executives. They bought Macy's for seventy dollars a share and at Finkelstein became the CEO. Yeah, this was largely to protect Macy's

from being taken over by one of the competitors. The nineteen eighties was an era. We've talked about this, I think a couple of times on the brink. The nineteen eighties was an era where the hostile takeover and the leveraged buyout where both frequently used tools where companies would swoop in and take over another company without their it's it. So instead of acquiring or merging with a company, you just go in and throw a stock maneuver, you take

over another company. And they were worried about that. And this was the biggest takeover of a retailer at that time. So at that point, things at least at first looked like they might actually be on the up and up. They almost made profit over the debt they incurred from the buyout, which is no small matter. I mean, we've seen acquisitions. In fact, we'll talk about a couple that ended up accruing so much debt that companies were never

able to recover from. Yeah. In fact, we'll talk about it now because in Macy's bought some of the federated stores in an attempt to start taking them over because Okay, we're doing good. This was this was a good move.

They bought Bullocks and Bullocks will Shires and it costs them a billion dollars and it tipped the debt scales against them, and so you've got that, and you've got the recession, and the holiday sales are down, profits are down, which is really tough because Macy's makes like of their annual revenue off of holiday sales. So now they're having

to drop prices again and they're getting overstocked again. So they're going back to that same problem that led all of the executives to buy Macy's, which led to this whole snowball. It's just it's this circular issue I was feeding on itself. And then they tried to buy back three hundred million dollars in bonds at half value to help alleviate some of their debt, and they announced that they're going to stop paying back their suppliers for the

indefinite future. Yeah, that's never a great sign now, and then they had more bad holiday sales. So this leads into January when it is no longer avoidable Macy's files for bankruptcy protection under Chapter eleven. Their creditors were in need of their money, they were not able to pay their suppliers, they were not doing well in sales, and this was, you know, kind of that hail Mary passed

to try and stay solvent long enough to to recover. Yes, and in April of that year at Finkelstein steps out as CEO and Myron E. Olman and Mark S. Handler step in. They had a five year plan to turn around and reorganize the company instead of a whole bunch of layoffs. Some of their big ideas where to cut the marketing budget and have less one day sales and have better customer service, and put in a computerized system

so they don't have so much overstock and inventory. And then happy holiday miracle, they have a better than expected holiday season. Also in that same year, Federated Department Stores would emerge from bankruptcy. Campo had ceased to exist, so Federated had re emerged as a public company that will become important again in just a moment. Back on Macy's side, in three they had closed sixty six on profitable stores in an effort to get rid of things that were

losing the money and open things that would make them money. Yes, so they open up news stores too, but these were in areas where they projected that they would be able to make a profit. Yes. Then Federated Department Stores, two years out of bankruptcy, comes up and acquires Macy's. The event that was feared back in the eighties has come to pass. Yes. Well, I mean they did kind of ask for it because shortly after Macy's had their buy out,

they bought some of Federated. The tides have turned. Yes, so Federated comes in and they acquire Macy's. This makes Federated a true giant in the department store industry. Yes, that gives them more than four hundred department stores in thirty seven different states. And they are acquiring of Macy's. Had to be approved by the US bankruptcy court because

this makes them such a large company. Yeah. This was one of those moves where a company has to pass government approval in order to actually go forward with a plan, because it's a possibility that the government would say no, this constitutes a monopoly and therefore it's anti competitive. Yes, but you know, Federated isn't trying to wipe out Macy's. Macy's has got a good name for itself. They're just trying to make one of us well. And also Macy's

was in danger of not being anything anymore. Yeah, so they acquired it, and then they emerged Macy's in their A and S in Jordan Eastern divisions to create one giant division worth four billion dollars. Yeah. And then they opened the Logistics in Operations division to help them distribute things better. So they're fixing some of the problems Macy's had and was struggling with. Ye. They would start to turn some of their stores into either a Macy's or

a Bloomingdale's. So but more Yeah, but this was this was largely taking existing department stores and then changing them over to this other brand. Sometimes it would mean, you know, different labels of clothing, for example, might be carried instead of what had been. But it was really repurposing already existing department stores but giving them a new identity. Yes, And then in they launched Macy's dot Com and then

they relaunched it, and then it was there. Macy's dot Com was there and it existed and people could use it. So now we're getting to the part where things are turning around. When we come back, will kind of follow up with how things developed from that point forward and have a couple of fun little tidbits along the way. But first, let's take a break to thank our sponsor. All Right, we're back and we're going to get back

to positive. In two thousand three, Federated department Stores started co branding the regional department stores as Macy's, so you'd have like Riches Dash Macy's. Yeah. It was actually kind of messy for a while, and by two thousand five they realized that they converted all the regional department stores to Macy's, yeah, removing some of that confusion. Also in two thousand three, a very important event happened. One that's incredibly important to the city of Atlanta, Georgia, where we are.

One that's incredibly important to me as someone who has lived in Atlanta, Georgia, I would say that I was Forloren that I missed this little holiday tidbit. Except for the fact that I've never been to the place you're about to talk about, you can still experience it. But in Atlanta, there was this thing, the pink Pig. Pink

pig associated with Christmas, by the way. It was on top of the rooftop at Riches department store in downtown Atlanta, and uh there was a mono rail little ride that had a pig face at the front of it, a pink pig, and the whole thing was painted pink, and you could ride in this little monorail. And then after a while that version of the ride would eventually get phased out and it became more of a standard train on tracks, but it was still with a pig face

in the front, and it was the pink pig. And it was at Riches for years and years and years and years. But then the richest department store closed in the nineties and they decided to run the ride for a little bit at a different park, But eventually they decided that was too expensive and it kind of went away. But in two thousand three, Macy's resurrected it and in Atlanta at the Lenox Square Macy's over in their parking lot area, the top of the parking garage, they have

the pink pig. Now is it year round or is it a holiday? It's holiday. It's Christmas oriented. So around Christmas you can go to Lenox Square and you can ride yourself the pink pig Man, because nothing is synonymous in my mind like a pig and Christmas. All right. So also to help with this reinvigoration, with getting back on their feet, macy starts a loyalty program in two thousand five. The more you shop at Macy's, the more benefits you get. And that would also be the year

that Federated would acquire the May department stores. So now those three big entities that had been competing with one another all belonged to the same Mecca Godzilla department store. And in two thousand six started the transporation of the May stores to Macy's. Which is easy. You just put a C in there and an apost vs. Yes, you just get a scoot it over. But this made Macy's from coast to coast so filled in any of the gaps they had in the states where stores were missing.

In two thousand eight, they celebrated being a century and a half old. Hundred fifty years old. Yes, and by this time Federated is no longer Federated. Now Federated is Macy's inc. Right, So Macy's Incorporated is now the holding company. So Macy's the department store and Macy's Inc. Are technically two different things. You have Mazie's Inc. That's the holding company that owns the Macy's department stores, which makes things

a little confusing. It's interesting to me that the company that acquired Macy's said now we want to be Mazie's two By two thousand ten, Macy's Inc. Is solid. They're doing real good, so much so that they announced a four hundred million dollar renovation to the Herald Square Macy's that they would start in two twelve. And also they decide we're gonna focus some more of our marketing towards millennials. Yeah, so I guess you walk into a Macy's and they say,

welcome to Macy's. Here's your avocado toast. Yes, I'm sure that is exactly what it is. So what's going on these days areal well, Like I said, Macy's is really trying to focus on what customers needs are, what their desires are. They're trying to focus their marketing and change with the trends. So online shopping is becoming more of a thing. I mean it has been more of a thing for more than a decade now. Yeah, and it

hurts retailers. So Macy's is really trying to stay on top of that and find interesting ways to bring people into the stores or to their online site in an effort to stay relevant. Uh, same day delivery and selected areas. I think they've got eight markets, online purchase, in store pickup, and mobile paying systems Apple. Yeah. For me, what I need is I need I need sort of a personal shopper type person who walks with me and Macy's, which I've seen before and says this would look good on you.

Stop looking at that thing that will make you look bad. I mean the time that I was at Harold Square, Macy's, I did have a personal shop. That's what I'm saying that they that's the sort of thing that Macy's has done to help bring people in, and that's the sort of stuff that benefits me. Yes, because I'm hopeless, you are not. You might think you are, you better than anything. In two thousand fifteen, they did have another bad year.

They didn't meet their estimated goals, but again, because they were so focused on consumer market trends and customer interests, they were able to turn it around. I mean retail is has been iffy in the past few years in general, right, we've seen an actual decrease in the number of people going to physical retail stores over the last couple of years. Even on traditionally busy days like Black Friday, we've seen a decrease in the number of people going to those stores.

But by end of two thousand seventeen, Macy's had made a fiscal sale amount of twenty four point eight three seven billion dollars billion dollars, which exceeded what they were estimating they would make. That's fantastic. Yeah, so the company is still going strong. We still have the traditional Macy's Thanksgiving Day parade. It happened again this year. Did you watch it this past year? I did, My sister did as well. I missed it. Pillsbury door boy had a

very scary mouth because it was so cold out. His mouth just kind of shriveled up. Oh no, it's like like once the screen. Um. Well, that wraps up our talk about Macy's and the Brink and how those late eighties.

I mean it was rough for all department stores for multiple reasons, a large one being that that greed is good kind of mentality that various nineteen eighties businesses we're pursuing, and I'm sure, in fact, I am absolutely positive that we will be doing other episodes of The Brink where that kind of plays into because that's why we had films like Wall Street, right, it had this this mentality that bread this kind of of of mythology around it,

and not all of it turned out great. Yes, funny, funny little tidbit last night when I turned on my TV two channels next to each other, first Miracle on thirty four Streets, second Wolf of Fall Street. Oh, I guess we get the long and short of it right there. Well, that wraps up this episode until next time. I have

been Jonathan Strickland and I have been aero casting. If you would like to learn more about what we've talked about, as well as keep track of all of our episodes, make sure you visit our website at the Brink Podcast dot show, or you can email us at Feedback at the Brink Podcast dot show