Tis the Season for Spending? Macy's Gears Up

Tis the Season for Spending: Macy's Gears Up

Macy's CEO Terry Lundgren on why the retail giant is still succeeding, despite a challenging economy

This is a rush transcript from "On the Record," November 24, 2011. This copy may not be in its final form and may be updated.

GRETA VAN SUSTEREN, FOX NEWS HOST: Tis the season for spending. It is also the make or break time for our economy. This year's holiday shopping season is taking added importance, businesses big and small struggling all year looking to ring in the season by ringing up sales. But with so many people still out of work, is there hope for the holidays? Department store giant Macy's is among the stores hiring thousands of seasonal workers. We spoke to Macy's CEO Terry Lungren.

(BEGIN VIDEOTAPE)

VAN SUSTEREN: Sir, nice to see you. Is this the oldest part of Macy's, this building?

TERRY LUNDGREN, MACY'S CEO: This the oldest part of Macy's, where it all belong, and it is also the largest store in the world.

VAN SUSTEREN: How big?

LUNDGREN: It's 1.1 million square feet of selling space, and it's about to be expanded to 1.2 million.

VAN SUSTEREN: How old is this building?

LUNDGREN: This building is over 100 years old. The original Macy's was down 14th street, 152 years ago.

VAN SUSTEREN: If you don't live in New York, you still know Macy's. The most fun is the Macy's day parade. That is Macy's, right?

LUNDGREN: Right.

VAN SUSTEREN: With the economy, everybody is fearful about the economy. But it doesn't look like you are hurting?

LUNDGREN: This store is a pretty special place. Our business is up 5.3 percent. In our industry that is spectacular. We're having a great year.

VAN SUSTEREN: Why is it up 5.3 percent?

LUNDGREN: Customers like what we have apparently, and I think it's a number of strategies we have executed over the last several years.

VAN SUSTEREN: But everybody has always liked your product. I see Ralph Lauren. People always like it. There has to be something different. Either the economy is picking up or something?

LUNDGREN: First of all, I think parts of the economy are positive, but it's not across the board. In our case, we're definitely taking market shares. We also see that. We are seeing the effectiveness of strategies we put in place, which is a focus on consumers who live locally. So we're trying to accommodate tourists and tri-state area but across the 800 stories. We're very focused on local consumer.

VAN SUSTEREN: How many employees at Macy's?

LUNDGREN: There's 170,000 full-time.

VAN SUSTEREN: So you have seasonal for the holidays, right?

LUNDGREN: We just hired 78,000 new employees for the holiday period. But it's still 3,000 more than we hired last year. We have 3,000 more temporary jobs. We also hired 4,000 new permanent jobs for the company this year as well.

VAN SUSTEREN: OK, so it's not just a situation as a result of the economy you are downsized you try to do with less and during the season you just add so it looks like you have more, but you're really sort of filling holes from prior times.

LUNDGREN: It's very simple. In our business, what drives employee growth is sales growth. When we grow our sales, we grow our earnings. When we grow our earnings we can add more people. So that is exactly what is happening. We're growing sales. We're adding employees. We're making better earnings for our economy.

VAN SUSTEREN: Do you have some sense of what percentage of your gross sales, between Thanksgiving and the new year, what percentage of the year is that of your total?

LUNDGREN: Yes, I do. We don't give specific details. I know exactly what that number is. It's a big number. Business really ramps up. You'll see it all the way through the period of December 27th and 28th. It's nonstop.

VAN SUSTEREN: And do you have an idea in the industry, not just Macy's what do most people in retail expect. What percentage at this time?

LUNDGREN: This time, this holiday period is about 30 percent of the annual business, but even higher percent of the annual earnings.

VAN SUSTEREN: The people that you hire for seasonal jobs between now and the new year, do some get full-time jobs? Do some hustle and establish themselves and you think we can't live without these extra people?

LUNDGREN: No question about it. We will definitely pick off the very best talent. Obviously, first look at them and see how well they do selling under pressure and in very various departments. We'll do everything we can to do that.

VAN SUSTEREN: I won't mention any competitors, but there something that Washington could do or not do to help your industry as a whole?

LUNDGREN: No question about it. I think what the consumer is looking for and business leaders are looking for certainty. What we would like to know is what is our corporate tax rate going to be? What is our individual tax rate going to be? What can we count on for GDP growth in the next couple of years? What can we expect, what can we count on? We don't know those answers and we're obviously hopeful to learn more and more as super deficit committee takes action and is responsive to some of these questions.

VAN SUSTEREN: Give me an idea. Corporate tax rate is going to be for the next five years so you have the certainty. How would you execute it? Show me how that certainty makes a difference?

LUNDGREN: Up or down, you are going to decide whether the country is going to invest in or take your business elsewhere. So that's going to matter. What is it going to mean in terms of employee tax. How much is it going to cost you for health care? What does it mean, what should I expect my selling general expenses to run at, and if it's going to be higher, what do I need to do to figure out how to offset it? We're going to offset it. We need those certainties, so we know the numbers that we can hire on a permanent basis and what we can expect our runway to be.

Our shareholders are not going to say, Washington is not helping you out. It's OK if you make less money. That is not how business works. And so we're going to have to scramble and do things differently to respond to what the new set of realities become.

VAN SUSTEREN: It must be maddening that business leaders and CEOs that you don't have that certainty and you see Washington a little bit of this logjam not making those decisions. It must be paralyzing in some ways?

LUNDGREN: In many ways it is. I'm making investments in America because I believe in our company. I believe in our strategy and our people and what we're doing.

VAN SUSTEREN: But your shareholders want you to make the most money.

LUNDGREN: They do indeed. And I'm counting on that happening. But they only way I am doing it right now is I'm taking market shares from others. All boats need to rise. That's how you're going to create jobs in America when all boats are rising, when all retail is performing. Retail impacts one in in four jobs in America. Think about the magazine business, the newspaper business and shipping and packaging business, all of those things. We impact so many jobs.

And if customers are not buying because customers are not feeling confident about what they're going to be able to keep at home in their savings account, if they're not buying, consumption is two-thirds is what drives GDP in America. So there is no other possible way other that other pieces of GDP can make up for that lack of confidence. That is what I am looking for to be corrected in 2012.

And believe me, I'm optimistic. I'm actually optimistic. We're making these investments because I think that it's the right thing for our company but I'm optimistic we're going to get our hands around this in Washington and deal with it.

VAN SUSTEREN: You are optimistic but hoping things are going to go in a particular direction. You're hoping that Congress is going to do a certain thing vis-a-vis corporate tax, but it puts you in a position of rolling the dice?

LUNDGREN: Not with my own economy. This year the economy has not been robust and yet we are performing very,very well.

VAN SUSTEREN: You talk about market share and to the extent that you get more market share you are taking it from somebody else.

LUNDGREN: That's right. So my investment is not rolling the dice. I'm investing in what we believe it.

VAN SUSTEREN: Macy's may be thriving and doing well, that means the store down the street may not be.

LUNDGREN: That is correct.

VAN SUSTEREN: You are taking the consumption from somebody else?

LUNDGREN: That is exactly correct. It can be fine for Macy's but it's not going to be fine for America. America needs certainty.

VAN SUSTEREN: For instance, let's take China and devaluation of tis currency, does have an impact on you? People wanted to buy things cheaper. Your shareholders want more money and people want to buy cheaper things?

LUNDGREN: No question about it. If you have a handbags here, and they're very similar in what the details are, one handbag is $50 and one handbag is $45, nine times out of 10 the $45 is the one is going to sell unless it's got Ralph Lauren's name or something that creates extra demand. But consumers definitely want value.

VAN SUSTEREN: And you and other business leaders you need to plan accordingly if Washington does something?

LUNDGREN: That's just us. But I think all businesses across the nation, they're going to decide on capital investments, big decisions in America or elsewhere because of the certainty that is missing. Again, I'm hoping it will come in the very near future.

VAN SUSTEREN: But a touch frustrating?

LUNDGREN: A touch frustrating, of course. I'm chairman of the National Retail Federation, so I spent a little time there talking about these very subjects and how important their decisions are on American business.

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