Inside the organized crime rings plaguing retailers including Ulta, T.J. Maxx and Walgreens

In a tony suburban enclave in the San Diego foothills, police say, an organized retail crime “queenpin” had built an empire.

Tucked behind the stone walls of her 4,500-square-foot Spanish-style mansion, Michelle Mack had stockpiled a small fortune in cosmetics that had been stolen from Ulta and Sephora stores across the country, authorities said. 

Police don’t suspect that Mack, 53, took the items herself. Instead, they say, she pulled the strings from the shadows, employing a network of around a dozen women who stole the items for her so she could resell them on Amazon.

Michelle Mack’s home in Bonsall, California, Dec. 6, 2023.

CNBC

With their airfare, car rentals and other travel expenses paid by Mack, the suspects committed hundreds of thefts up and down the California coast and into Washington, Utah, Oregon, Colorado, Arizona, Illinois, Texas, Florida, Pennsylvania, Massachusetts and Ohio, investigators said. Mack selected which stores to target and what merchandise to take and the women were sent to clear out entire shelves of merchandise before making off with the stolen goods stuffed into Louis Vuitton bags, investigators said.

Investigators began referring to the theft group as the “California Girls” and considered Mack the crew’s ringleader. She made millions reselling the stolen items on Amazon to unwitting customers at a fraction of their typical retail price, investigators said, before she was arrested in early December.

Michelle Mack is taken into custody, Dec. 6, 2023.

CNBC

Law enforcement officials say Mack’s alleged theft ring is just one of the many that are plaguing U.S. retailers and costing them billions in losses annually. Their rise has led many companies to lock up merchandise, hire security guards and lobby lawmakers for stricter regulations.

These organized theft groups don’t typically carry out the splashy “smash and grab” robberies seen in viral videos. Instead, they pilfer goods quickly, quietly and efficiently. They often function within elaborate, organized structures that in some ways mimic the corporations they’re stealing from, police said.

CNBC has spent about eight months embedding with various law enforcement agencies and investigating theft groups to understand what organized retail crime looks like from the ground. In some cases, CNBC witnessed low-level shoplifting incidents involving people who appeared to be homeless or mentally ill. In other instances, CNBC saw takedowns of alleged organized theft groups that police said were reselling stolen merchandise at flea markets. Mack’s group, from her alleged network of professional thieves to her lucrative Amazon marketplace, was by far the most sophisticated one CNBC tracked alongside police.

California Highway Patrol officers arrest a retail crime suspect.

CNBC

But federal agents with Homeland Security Investigations, the Department of Homeland Security’s law enforcement branch, said some crime groups are even more elaborate — and theft is just one facet of their enterprises.

“We’re talking about operations that have fleets of trucks, 18-wheelers that have palletized loads of stolen goods, that have cleaning crews that actually clean the goods to make them look brand new,” said Adam Parks, an assistant special agent in charge at HSI, which is the main federal agency investigating retail crime.

“Just like any business, they’ve invested their capital into business assets like shrink wrap machines, forklifts,” Parks, who works out of HSI’s Baton Rouge, Louisiana, office, told CNBC in an interview. “That is what organized theft looks like, and it actually is indistinguishable from other e-commerce distribution centers.”

These theft groups in their myriad forms have become a thorn in the side of retailers big and small, prompting retailers to cite crime as the reason for lower profits, the inability to hire and retain staff, and the degradation of the in-store experience. They have also united politically divided Americans in their disdain for seeing everyday products locked up behind glass cases and witnessing brazen theft gone unchecked in stores.

Suspected stolen cosmetics found inside Michelle Mack’s home.

CNBC

Whether organized retail crime is actually rising is up for debate. Retailers including Target, Foot Locker, Walgreens and Ulta have said theft is a growing problem in recent years. But few have said how often it’s happening or how much money they’re losing from it, fueling accusations from some experts and analysts that they’re blaming crime in order to mask operational missteps.

The National Retail Federation estimates that retailers lost $40.5 billion to external theft, including organized retail crime, in 2022. That represented about 36% of total inventory losses — slightly lower than the 37% in 2021.

Even if theft has not meaningfully reduced some retailers’ profits, many have warned that crime can threaten the safety of workers and shoppers.

“The financial impact is real, but way more important is the human impact, the impact it has to our associates, the impact it has to our guests,” Ulta CEO Dave Kimbell told CNBC in a rare sit-down interview.

“It also impacts the communities in which we live,” he said. “If people don’t feel safe going in to shop in certain areas of a community, it really has an impact and can change neighborhoods and change communities over time.”

The government response to the issue has grown in turn. Both local and federal agencies have stepped up enforcement of laws targeting organized retail crime, and lawmakers are proposing and passing more measures that stiffen penalties for theft offenses.

HSI initiated 59 cases against organized theft groups in fiscal 2021, resulting in 55 indictments and 61 arrests, the agency said.

By the end of fiscal 2023, cases had more than tripled, to 199. Indictments spiked more than fivefold to 284, while arrests soared to 386, more than six times the number in 2021.

California Highway Patrol, which runs one of the most active retail crime task forces in the country, reports it made 170% more arrests for organized theft offenses in 2023 than it did in 2022.

It’s not clear whether organized theft offenses increased in that time or officials ramped up enforcement as the issue got more public attention and the retail industry’s lobbying engine pressed them to make it a priority.

CNBC embedded with teams from HSI and California Highway Patrol to witness four organized retail crime operations for this investigation. The probe is also based on more than a dozen interviews with law enforcement officers, retail leaders and customers, along with records, including court filings, company reports and property records.

New Orleans

On a sweltering Monday morning in July, about a dozen agents from HSI New Orleans gathered behind the U.S. Custom House, preparing for Operation French Quarter.

The officers were instructed to pose as shoppers inside three Walgreens stores and one CVS store in the area seeing high rates of theft, sometimes as many as 20 to 30 incidents per day, agents said.

As federal law enforcement agents who typically investigate terrorism, sex trafficking and gang leaders such as Joaquin “El Chapo” Guzman, the officers weren’t there to arrest people for petty theft. They had a clear directive: Find out who’s stealing and follow them out of the store to determine who else they may be working with.

“Obviously, the name of the game, guys and girls, is trying to get the bigger and better fish,” Assistant Special Agent in Charge Scott Robles, who led the operation, told the assembled officers. “We’re trying to identify the people who are in charge of this organized crime.”

Assistant Special Agent in Charge Scott Robles of Homeland Security Investigations addresses a team of undercover agents in New Orleans, July 17, 2023.

CNBC

At the bottom of organized retail crime rings are boosters — the people who go into stores and take the items. Robles was hoping the serial thieves targeting the drugstores could lead them to a larger operation.

“It can be anybody. It could be the mom with five kids just looking for extra money. It can be somebody that’s part of a team. … They may be getting paid with food, they may be getting paid with beer or drugs,” Robles said. “Some people get paid cash or they’re trying to work off a debt.”

Throughout the hourslong operation, agents identified at least one case that they say plainly showed organized theft.

Surveillance footage of the incident shows a man enter one of the Walgreens stores, head to the cosmetics aisle, remove a plastic shopping bag from his pants and calmly load it up with 17 jars of nail polish, valued at around $200. He then walked about a half mile away to the New Orleans Public Library’s main branch, where he sold the nail polish to a security guard, police said.

Federal agents briefly questioned the security guard, and the incident remains under investigation.

Beyond that instance, the vast majority of the thefts agents witnessed during the operation were low-level and petty, involving people who appeared to be homeless, mentally ill or transient. One man stole paper towels and then walked into a homeless shelter. A group took a case of beer and later went to a park to drink it. A woman stole a case of water, set up a stand to resell it and then defecated on the sidewalk.

Operation French Quarter showed how the lowest level of a retail crime operation can function, and how even small thefts can involve coordination among bad actors. Still, the incidents underscore the challenges investigators face when trying to build cases; they also demonstrate just how petty many thefts are, especially in urban areas with high rates of homelessness and addiction.

A Walgreens spokesperson told CNBC that the chain is “focused on the safety of our patients, customers and team members” and is taking steps to “safely deter theft” and “deliver the best patient and customer experience.”

“We are working closely with law enforcement, elected officials and community leaders to draw greater attention to and improve our response to retail crime,” the spokesperson said.

San Jose

Crates filled with unopened jugs of Gain, Tide and Downy detergent. Boxes stuffed with Gillette razors, Olay moisturizer and Allegra allergy pills. A pile of sparkly silver boots in sizes 8, 9 and 10 with the T.J. Maxx tags still on.

This is just some of the merchandise that California Highway Patrol found inside a home and storage container belonging to suspected members of an organized retail crime ring during a raid in November.

A bin filled with sparkly silver boots that police suspect an alleged San Jose, California, crime ring stole from T.J. Maxx.

Gabrielle Fonrouge

In all, investigators uncovered nearly 20,000 items valued at more than $550,000 across five locations connected with the group, according to CHP. Police suspect the majority of the items were stolen from T.J. Maxx stores and a variety of drugstores and grocery stores in and around the Bay Area.

CHP’s probe began in September, when investigators from TJX Companies, the owner of T.J. Maxx, reached out to the agency’s organized retail crime task force with information about a crime ring that it said was buying and reselling stolen goods — a “fencing” operation.

When boosters need to cash in on the items they take, they turn to fencers, who buy the products for pennies on the dollar and resell them at a margin Wall Street could only dream of, retail crime investigators have said.

Experts said retailers can have a hard time persuading law enforcement to investigate theft at stores because it is often considered a property crime, which police tend to see as less urgent than homicides, shootings and narcotics crimes.

To show law enforcement the scope of the problem, TJX investigators began conducting surveillance on the alleged crime ring. CHP agreed to take the case. Sgt. Manny Nevarez, who oversees all organized retail crime investigations in the Bay Area for CHP, told CNBC the group had hit stores in multiple counties in an effort to evade detection.

“They are not catching on that some of the retailers have their own loss prevention personnel and typically, if you target one store in San Jose, then the word gets out and then the next store is notified,” said Nevarez. 

Sgt. Manny Nevarez oversees organized retail crime investigations in the Bay Area for California Highway Patrol.

CNBC

Police learned that alleged members of the group were reselling the suspected stolen merchandise out of their homes and at the local Capitol Flea Market — a sprawling swap meet on the outskirts of San Jose. Officers also witnessed members of the crew receiving suspected stolen merchandise, transferring those goods to others in their network and exchanging money.

At the end of November, dozens of CHP investigators working with TJX descended on the five locations connected with the alleged fencing ring and carried out search warrants in a raid cops dubbed “Operation Kingsfall.” The locations included numerous homes along with a storage unit. 

“Nosotros somos policia,” the officers shouted in Spanish outside one of the homes. “Police, search warrant. Open the door with your hands up,” they continued, switching between English and Spanish before using a battering ram to knock down the door.

Officers from California Highway Patrol approach a home suspected to be connected with an organized retail crime ring in San Jose, California, Nov. 28, 2023.

CNBC

The location, an innocuous single-family home with Christmas decorations out front, looked like any other on the block. But on the sidewalk and grass near the property line sat dozens of discarded clothing tags, anti-theft devices, hangers and other retail store detritus.

Inside the home, CHP officers and TJX personnel found mountains of goods they suspect were stolen to resell, including bags of apparel with the tags still affixed, boxes of Huggies diapers, liquor and power tools.

By the time authorities completed the raids, they had enough suspected stolen merchandise to fill three 20-foot-long U-Haul trucks. A spokesperson for the Santa Clara County District Attorney said it is charging nine defendants in connection with the alleged crime ring.

Investigators examine suspected stolen merchandise connected with an alleged organized retail crime ring in San Jose, California.

CNBC

The law enforcement operation witnessed by CNBC showed the breadth of some of the fencing rings in the U.S. and how flea markets can play a role in the sale of stolen goods. Capitol Flea Market didn’t respond to a request for comment. 

“There’s certain crimes that come up where the public reaches a point where they’re like, ‘We have had enough of this,’ right?” Lt. Michael Ball, who helped oversee the operation, told CNBC. “And this is one of those that’s reached that level where people are saying widely and shouting it all the way up to our governor’s office that they have had enough of this.”

In a statement, a TJX spokesperson said the company is “thankful” for CHP’s efforts and is taking organized retail crime “very seriously.” The spokesperson said TJX is “laser-focused on ways to mitigate theft in our stores.”

The company told CNBC it will not resell the recovered merchandise. If TJX considers the items to be in suitable condition, it will donate them to charities in the area where they were found, the company said. If it deems the products unsuitable, it will work to dispose of them “responsibly,” it said.

San Diego

When Donna Washburn started shopping for a Christmas gift for her daughter in December, she wanted to “splurge” and buy her a bottle of Nars foundation. But she couldn’t find it in stock at a store close to home.

So, like many consumers, she Googled the product. She saw it was available on Amazon and cost around $38 before tax, nearly 30% cheaper than its typical retail price of $52.

“I said, you know, ‘It’s Amazon, it’ll come fast.’ It was the beginning of December. So I really didn’t want to wait too much longer for Christmas,” Washburn told CNBC in an interview, adding she was told it would arrive by Dec. 11.

Donna Washburn bought a beauty product from Michelle Mack’s Amazon store that police suspect had been stolen.

CNBC

Unknown to Washburn, police say, that bottle of foundation had likely been stolen by the crew of boosters allegedly employed by Mack — the suspected retail crime mastermind accused of running an illicit business from her San Diego mansion.

The Christmas gift ultimately never arrived, because Mack was arrested before she could ship the package, which was one of many found in Mack’s residence by investigators.

“I pay attention, but not that much, you know?” said Washburn, a 63-year-old clinical education associate in St. Augustine, Florida. “I’m shopping from Amazon. Hopefully you can trust it. So now that we know better … we’ll think twice.”

Washburn had bought the foundation from an Amazon storefront dubbed Online Makeup Store, which Mack had opened in 2012. CNBC viewed it before it was taken down in late 2023.

Suspected stolen cosmetics found inside Michelle Mack’s home.

CNBC

On its face, Mack’s storefront looked no different from the millions of others on Amazon’s marketplace. It had 4.5 stars on more than 100 reviews, and featured cosmetics from popular brands such as Mac, Tarte and Charlotte Tilbury that shoppers can find in neighborhood beauty stores.

There was just one red flag: the prices. Many of the products for sale at Mack’s store were listed at a fraction of the typical retail price, including a $25 bottle of Estee Lauder foundation that typically retails for $52 and Too Faced mascara that typically goes for $29 and was being sold for $17.

The store brought in millions. Since 2012, Mack sold nearly $8 million in cosmetics through the storefront before it was shut down, and she brought in $1.89 million in 2022 alone, Amazon sales records provided to investigators show.

Mack could offer such low prices, police suspect, because her crew of boosters had stolen the products in hundreds of incidents over more than a decade. Some of the thefts brought in around $2,000 in merchandise while others netted as much as $50,000 worth of merchandise, prosecutors said.

Mack’s business was humming along ahead of the holiday shopping season until the carefully crafted empire police say she built crumbled. On a cool December morning just before dawn, a convoy of CHP and HSI agents, armed with a search warrant, raided her sprawling mansion.

Mack, dressed in a baby pink pajama set and a pair of fuzzy mule slippers, was handcuffed and put into a police car as her teenage daughters stood in the driveway, watching.

Inside her garage, investigators found what they described as a “mini-store” — shelves and shelves of beauty products, sunglasses and designer bags organized in neat bins and categorized by product. They also found hundreds of postmarked yellow envelopes destined for unwitting customers, including Washburn, with “Online Makeup Store” marked as the return address.

Police recovered nearly 10,000 items worth a total of more than $387,000, CHP said.

A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who is accused of masterminding an organized retail crime network from her home in San Diego.

Source: California Highway Patrol

A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who is accused of masterminding an organized retail crime network from her home in San Diego.

Source: California Highway Patrol

A California Highway Patrol evidence photo of suspected stolen goods taken from the garage of Michelle Mack, who is accused of masterminding an organized retail crime network from her home in San Diego.

Source: California Highway Patrol

In February, California Attorney General Rob Bonta filed a total of 140 felony charges against Mack; her husband, Kenneth Mack; and seven other alleged members of the crew. The charges included conspiracy to commit organized retail theft, grand theft and receipt of stolen property. The defendants have all pleaded not guilty. CNBC contacted each defendant multiple times for comment, but none of them responded.

“This is a multimillion-dollar criminal scheme. It was complex. It was orchestrated,” Bonta said when announcing the charges. “We are not talking about garden-variety shoplifting.”

Court records filed in connection with the case provide a rare glimpse into the inner workings of an alleged organized retail crime ring. They show text messages between the suspects and details about the operation.

“I’m not stealing regular I’m going to start filling up my bag quick. So I want to know stuff I can grab in bulks too,” Kimora Lee Gooding texted Michelle Mack on Jan. 7, 2023.

Between Jan. 30 and Feb. 16, 2023, Gooding committed at least 10 separate thefts at Ulta stores across California, prosecutors allege in court records. In each case, Gooding took more than $950 worth of goods, the records say.

On Feb. 21, a few days after Gooding’s string of thefts, Mack sent her a screenshot of “Online Makeup Store” with an address she could ship the stolen products to. It was the same business address that was listed on Mack’s Amazon page before it was shut down, and traced back to a post office box a few miles from her home.

“Even without lancome we still did well,” Michelle Mack texted her husband two days later, allegedly referencing a prestige cosmetics brand owned by L’Oreal.

Soon, orders were pouring into Michelle Mack’s Amazon store.

California Highway Patrol Officer Andrew Barclay outside Michelle Mack’s home during her arrest.

Scott Zamost

“Lots of orders let’s get shipping,” Kenneth Mack texted Michelle Mack alongside an image that showed a bin full of paper.

By July 8, it appeared that the haul Gooding and others had allegedly brought in had dried up. Michelle Mack needed more things to sell.

“Did you get some new girls?” Michelle Mack texted Alina Franco, another person charged in connection with the theft crew. “I really need product so if you have anything please let me know.”

A day later, two more thefts connected to the ring were committed and many more followed, prosecutors said.

In addition to Ulta and Sephora, the theft organization targeted a range of other retailers, including Macy’s-owned Bloomingdale’s, Prada, Bath & Body Works, Victoria’s Secret, and Luxottica’s Sunglass Hut and LensCrafters, prosecutors said.

Sephora and Bath & Body Works declined to discuss the case with CNBC. Victoria’s Secret, Macy’s, Prada, Sunglass Hut and LensCrafters didn’t respond to requests for comment.

Despite the recent surge of headlines and commentary on the topic, organized theft groups have long operated around the world. But retail industry leaders and some law enforcement officials argue the rise of online marketplaces and e-commerce has caused such incidents to increase or have made it easier for theft groups to operate.

“There’s an ease of distribution that has become even more prevalent for stolen goods through online marketplaces. … You used to have to sell stolen goods at flea markets or out of the trunk of your car or maybe just locally,” said Ulta’s Kimbell. “Now, you have more sophisticated tools to have a broader reach across the country or even internationally.”

Ulta Beauty CEO Dave Kimbell said online marketplaces need to do more to prevent the sale of stolen goods.

CNBC

While Kimbell didn’t name Amazon specifically, he said online marketplaces are “part of the problem” and should be using the data, analytics and other technology available to them to be more “proactive” in shutting down bad-actor sellers.

“We shouldn’t have an environment where it’s possible to steal from one retailer and [have it] end up on any other platform, any other large-scale, mainstream platform” that people consider legitimate, said Kimbell.

Bonta called on Amazon and other marketplaces to “do more.” He said they could inform law enforcement, or at least talk to a seller, when red flags such as unusually cheap goods pop up.

“If you freeze out the demand and remove the market by closing out the marketplace where the stolen goods are so easily sold, you make organized retail crime as an organized crime less attractive. And we need to create barriers, instead of ease, for the ability to commit these crimes,” Bonta said in an interview.

California Attorney General Rob Bonta discusses Michelle Mack’s case in an interview on Feb. 16, 2024.

CNBC

In response, an Amazon spokesperson said that the company has “zero tolerance for the sale of stolen goods” and that the company invests more than $1 billion annually in preventing fraud and abuse.

“We leverage sophisticated detection and prevention solutions across our stores and fulfillment operations, allowing us to quickly spot a range of organized retail crime (ORC) schemes,” the spokesperson said in a statement.

The spokesperson said Amazon supports efforts to trace items throughout the supply chain and investigates allegations of stolen merchandise to find out how products were obtained.

“When we identify an issue, we work closely with law enforcement, retailers, and brands to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals,” which have led to arrests, product seizures and the disruption of retail crime rings, the spokesperson wrote.

The company said it assisted with the investigation into Michelle Mack’s alleged theft crew and provided evidence to investigators. It said it’s “pleased” the suspects were arrested because it “sends a strong message that the sale of stolen goods has severe consequences.”

Consumers, many of whom are hungry for deals as they contend with lingering inflation and high interest rates, may feel that buying stolen goods is a victimless crime, experts say.

Michael Krol, HSI’s special agent in charge, disagrees with that idea. He said not only does theft lead to higher prices for consumers but also the items they’re buying could be unsafe because of how they were stored or otherwise manipulated.

“Those items might not have the quality assurance and compliance that we expect in the United States. Baby formula, your medicines … [Consumers] could be buying baby formula that’s expired by three months,” said Krol.

The Inform Consumers Act, which took effect in June, was designed to curb the sale of stolen, counterfeit or otherwise harmful products on online platforms by requiring marketplaces to verify and share identifying information on certain third-party sellers.

The law was designed to prevent the exact type of illicit business Michelle Mack is accused of conducting on Amazon. If sellers are required to provide their contact information to marketplaces and on their listings, bad actors may be deterred from selling illicit goods.

However, Michelle Mack’s business name and an address belonging to it had been verified and was publicly available on her seller’s page. She’d already been on the platform for more than a decade by the time the Inform Act rolled around.

The verification process that Amazon conducted for Michelle Mack’s store after the Inform Act passed wasn’t enough to raise the company’s suspicions, either.

“In this instance, we did not receive signals to identify the seller was engaged in selling stolen goods,” Amazon said.

As part of the law, marketplaces are also required to provide a way for people to report suspicious product listings. But the law doesn’t require the marketplaces to do anything with that information.

“Amazon works hard to ensure our store is a safe and trusted place for shoppers,” Amazon says on a page where people can report suspicious listings. “If you believe any product, seller or other activity in our store is suspicious, please report this using one of the below methods.”

“While we are not able to respond directly to each report,” it says, “we appreciate your feedback.” 

— Additional reporting by Ali McCadden  

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New Macy’s CEO Tony Spring looks to revive a 166-year-old retailer fighting for relevance

Tony Spring speaks at an event unveiling the Macy’s new women’s apparel brand, On 34th, in July. Spring is former CEO of Bloomingdale’s and begins as Macy’s CEO in February 2024, succeeding longtime Macy’s CEO Jeff Gennette, right.

Melissa Repko | CNBC

Inside its headquarters in New York City’s Herald Square, Macy’s got ready to unveil its newest women’s clothing brand. Its incoming CEO Tony Spring prepared for his own reveal.

Spring took the stage in mid-July in front of fashion influencers, reporters and Macy’s employees, standing beside his soon-to-be predecessor, Jeff Gennette. He was at the pinnacle of his career, making his first public in-person appearance since being named CEO-elect of the 166-year-old department store operator.

Yet where many top executives would have lapped up the limelight, the 58-year-old retail veteran and leader of Macy’s higher-end department store chain Bloomingdale’s kept his remarks brief. He spoke for less than two minutes, then quickly stepped aside for On 34th, the company’s new brand of women’s clothing and accessories, to get the spotlight.

Spring will step onto a bigger stage and inherit the iconic department store’s issues when he takes over the role of Macy’s CEO on Sunday. His push to revive the retailer will depend in no small part on his ability to curate strong brands and store designs — and let the products win over shoppers.

Among the company’s challenges, Spring will contend with inflation-weary shoppers who continue to watch their discretionary spending, confront lower employee morale after more than 2,000 recent layoffs and stare down a contentious battle with activist investors. Macy’s has lost cachet with younger shoppers and brands who see its sprawling stores and endless aisles of merchandise as a relic of the past.

Investors have taken notice. Macy’s stock closed at $18.63 per share Friday, giving it a market cap of $5.11 billion. Shares have fallen about 24% in the last year.

Spring will face existential questions about how Macy’s can stay relevant and grow rather than shrink, as competitors such as Amazon, T.J. Maxx and even Target and Walmart steal away sales. He will also lead Macy’s promising efforts to chase suburban shoppers with smaller stores in strip malls, expand its offerings of trendier exclusive brands and luxury names, and build on the strong performance of newer businesses such as its beauty chain, Bluemercury, and its off-price business, Backstage.

In CNBC interviews, current and former Macy’s employees, industry leaders and investors said Spring will bring a deep retail background, a merchant’s sharp eye and credibility with coveted national and global brands from his decades at Bloomingdale’s.

Yet they acknowledged the new CEO will have his hands full. Some expressed concern that as a longtime executive at the company, Spring won’t bring the same scrutiny an outsider would.

“When you have an internal appointment, you don’t tend to see that much shake-up in the wider team, and sometimes that’s needed,” said Neil Saunders, managing director of research firm GlobalData. “The biggest risk is just really that. Someone new comes in the post, but we just see a continuation of the same old strategies without much new thinking.”

Macy’s declined interview requests for this story, but Gennette praised Spring as the right person for the job when the company announced his retirement and his successor’s appointment in March. Gennette pointed to Bloomingdale’s strong results — the higher-end department store has outperformed the namesake Macy’s brand in recent years — and described Spring as “an ally and trusted partner in advancing Macy’s, Inc.’s strategies.”

“Tony consistently innovates for the customer, is an exceptional brand builder and an excellent talent developer who has strengthened our culture through his leadership,” he said in the news release.

‘A merchant at heart’

Spring’s ascension to the top role at Macy’s is the culmination of nearly four decades with the retailer. Fresh from graduation from Cornell University, he was hired by Bloomingdale’s in 1987 as an executive trainee in the White Plains, New York, store.

He moved up the ranks, ultimately becoming CEO of the higher-end department store in 2014.

Even as he rose, Spring described himself as committed to one of retail’s key building blocks: making sure stores draw customers in, invite them to linger and surprise them with beautiful displays and items they didn’t know they needed. It’s a touch shoppers and Wall Street believe Macy’s could use as it fights for relevance.

“I’m a former merchant,” he told the audience at the launch event for Macy’s “On 34th” brand in July. “I still consider myself a merchant at heart.”

Bloomingdale’s is known for having a knack for understanding customers and which brands to carry. The chain, which has 55 locations across the country, has been a crown jewel of its parent company despite its smaller size. It carries pricey and prominent luxury brands, including Theory, Sandro and Alice + Olivia, but also has popular and more affordable in-house brands, such as Aqua.

It has also drawn shoppers with limited-edition pop-ups and collections of merchandise that tap into the cultural zeitgeist or cater to the Instagram and TikTok generations, such as an exclusive Barbie-themed clothing line.

Macy’s namesake brand accounts for most of its stores and revenue, yet Bloomingdale’s and Bluemercury have seen better sales trends.

On CNBC’s “Mad Money” in October, Spring said his time at Bloomingdale’s reinforced “it’s all about curation of product and the delivery of a better experience for the customer.”

“Retail is theater,” he said in the interview.

He described Bloomingdale’s as “a growth vehicle” but said the company’s namesake brand can be one, too.

“We’re talking to different customers and we can obviously learn from one another without becoming one another,” he said.

GlobalData’s Saunders has criticized Macy’s for sloppy displays, bland merchandise and poor customer service at its namesake stores. He said after leading “the better-run part of the business” in Bloomingdale’s, Spring needs to bring those “softer skills” to Macy’s.

“Get some pride back into the business,” he said. “That might mean making some investments. It might mean putting back in visual merchandising teams. It might mean investing more in staff and labor hours, but I think it’s a decision worth taking. And it’s a relatively easy win.”

Spring will have tougher tasks, though, Saunders said. In a competitive industry, Macy’s needs a sharper identity to compete with specialty retailers, big-box stores and off-price players that often beat the department store on convenience, value and fashion, he said.

And, he added, Spring must take a hard look at the company’s real estate footprint to decide where it should shut stores, shrink locations or expand outside the mall.

Wooing investors and brands

In his new role, Spring will have to charm investors, shoppers and hot brands. It’s a delicate balance, as its efforts to boost sales, make the store experience more appealing to customers and win over investors hungry for profits could at times clash.

As its stock value has eroded, Macy’s has gotten smaller by most other key metrics, too. Over the past decade, the company has closed about a third of its namesake stores. Its annual net sales have fallen during that same period, from about $28 billion in 2013 to $24.4 billion in the last full fiscal year it has reported, which ended in late January 2023.

Macy’s struggles have turned the retailer into a target for the activist investors Spring will face down as he becomes CEO. Its board last month rejected a $5.8 billion proposal by Arkhouse Management and partner Brigade Capital Management to acquire the shares of the retailer that they don’t already own and take the department store operator private.

In an interview on CNBC after that rejection, Arkhouse managing partner Gavriel Kahane signaled that he hasn’t given up yet. He called on Macy’s to open up its books to the investors, or the firm will take the matter to shareholders, he said.

Certainly not done with pursuit of Macy's acquisition, says Arkhouse's Kahane

Investors will get their best glimpse into the health of the company Spring is inheriting in late February, when Macy’s is expected to report its holiday-quarter results and its outlook for the year ahead. In the previous quarter, the retailer said it expected same-store sales to decline by up to 7% in the fiscal year that ended in late January.

Though the company’s sales are sagging, Spring will take over promising pockets of the business, as well. Its smaller stores, which Macy’s is opening in a growing number of strip malls, have outperformed sales at its traditional, mall-based locations. After launching the women’s clothing brand On 34th, Macy’s plans to debut and refresh other lines that shoppers can find only at its stores and on its website. That private brand strategy has succeeded for other retailers, such as Target.

Spring’s career as an insider has raised concerns among some industry analysts. A Macy’s spokesperson said that while Spring came up through Macy’s, he has pushed for adding fresh perspectives to the retailer’s leadership team. Many of the company’s recent top hires have come from the outside.

Those include his successor at Bloomingdale’s, Olivier Bron, who was most recently CEO of department stores in Thailand; and Sharon Otterman, Macy’s new chief marketing officer, who came from Caesars Entertainment.

Having the right national brands will also shape Macy’s future success. It’s another area where Spring’s experience as a merchant could benefit the company.

Compared with rival Nordstrom, Macy’s has been slow to add younger and newer brands that can draw fashion-forward customers.

As Macy’s expands its third-party marketplace, some new brands have joined its website. One of those is Untuckit, a men’s apparel brand typically sold directly through its own stores and website.

Just ahead of the holiday season, the company’s clothing debuted on Macy’s website. It was Untuckit’s first meaningful push into wholesale, said the brand’s CEO and co-founder Aaron Sanandres.

Sanandres said he saw Macy’s as a way to reach shoppers who haven’t yet discovered Untuckit. Now, he said, it’s considering its next moves in wholesale — including the possibility of selling apparel at Macy’s stores.

Yet he said he has grappled with the same questions that other popular brands may have. Will merchandise get confined to a corner of Macy’s huge stores? Will its reputation take a hit from being carried by a retailer associated with old-school malls or 40%-off signs? Can it keep tight control over its own brand’s level of promotions?

“There are a lot of conversations around that, and it’s partly why we’re baby-stepping into the relationship to make sure we don’t see any negative pushback from our customer,” he said.

One of the most crucial parts of Spring’s job will be attracting millennial and Gen Z shoppers who don’t share the same loyalty as their parents and grandparents to Macy’s namesake stores and website, said Oliver Chen, an equity research analyst for TD Cowen.

Winning those shoppers over will come down to having better merchandise and a sense of style, he said.

“You need to be inspired by Macy’s,” he said. “The customer doesn’t necessarily want the cheapest thing from Macy’s. They want a nice, fashion-forward thing.”

Some of those shoppers are like Annie Rush. On a recent weekday, she zipped in and out of Paramus Park mall in New Jersey to make a purchase for one of her teenage sons.

Rush said she prefers to shop online, where she can search for what she wants with the help of filters. At a Macy’s store, the sea of options can be overwhelming, she said.

“Sometimes they offer too many things,” Rush said. “It’s like decision paralysis. You can’t find what you want or have to dig.”

With an Old Navy bag in hand, she cut through Macy’s only to get to the mall’s parking lot.

— CNBC’s Gabriel Cortes contributed to this report.

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Off-price retailer TJX delivers another earnings beat, making its stock a buy

A T.J. Maxx store in Pasadena, California.

Mario Anzuoni | Reuters

TJX Companies (TJX) reported better-than-expected fiscal year 2024 third-quarter results on Wednesday, while again raising its outlook for the full fiscal year — prompting us to upgrade the stock to a buy-equivalent rating.

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Jim Cramer’s top 10 things to watch in the stock market Friday

My top 10 things to watch Friday, Nov. 3

1. U.S. stocks climb higher in premarket trading Friday, with S&P 500 futures up 0.46% after rising nearly 5% over the previous four sessions. Equities remain on track for their biggest weekly gain of the year. Government bonds also continue to rally this week, with the yield on the 10-year Treasury pulling back to around 4.5%. Oil prices tick up 0.78%, bringing West Texas Intermediate crude to just above $83 a barrel.

2. U.S. employment growth slows in October, with the economy adding just 150,000 jobs, according to the Labor Department’s monthly nonfarm payrolls report. That compares with September’s revised gain of 297,000 jobs and a Dow Jones estimate for October of 170,000 jobs. The news could take further pressure off the Federal Reserve in its ongoing battle to bring down inflation through higher interest rates.

3. Club holding Apple (AAPL) delivers an uneven fiscal fourth-quarter, with shares falling on lower-than-expected guidance for the current quarter. Analysts are using the results to reset expectations and lower price targets. Apple stock is down 1.7% in premarket trading, at $174.57 a share.

4. Semiconductor firm Skyworks Solutions (SWKS) reports a weak quarter as a result of Apple’s slowdown, prompting a slate of price-target reductions Friday. Barclays lowers its price target on the stock to $90 a share, down from $115, while maintaining an overweight rating on shares.

5. The takeaway from Club holding Starbucks‘ (SBUX) fiscal fourth-quarter beat is that the coffee maker needs so many more stores both in the U.S. and in China, while it’s barely begun to tackle India. Baird on Friday raises its price target on Starbucks to $110 a share, up from $100, while reiterating a neutral rating.

6. Barclays on Friday raises its price target on Club name Eli Lilly (LLY) to $630 a share, up from $590, while maintaining an overweight rating on the stock. The call seems like a good idea after Eli Lilly delivered solid quarterly results on the back of its blockbuster drug Mounjaro.

7. Shares of cybersecurity firm Fortinet (FTNT) plunge nearly 20% in early trading after its third-quarter results miss on analyst expectations, while providing a weak outlook for the current quarter. Multiple Wall Street firms downgrade Fortinet Friday on the weak quarter and signs secure networking is seeing slower growth.

8. Barclays lowers it price target on Clorox (CLX) to $115 a share, down from $118, while maintaining an underweight rating on the stock — and that seems harsh. The firm calls Clorox’s reduced outlook “prudent given the uncertainty ahead.” Clorox warned last month that an August cyber attack had significantly weighed on sales and profits.

9. KeyBanc upgrades Uber Technologies (UBER) to overweight from a neutral-equivalent rating, with a $60-per-share price target. The firm says Uber’s expense discipline should continue to drive earnings and free cash flow, while advertising “provides a lever to keep prices low to drive volumes.” Uber is set to report third-quarter results on Nov. 7.

10. Gordon Haskett upgrades Ross Stores (ROST) to buy from accumulate, with a $135-per-share price target. The firm says its third-quarter proprietary store manager survey “paints a positive picture” for both Ross and Club name TJX Companies (TJX).

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What Investing Club members are reading right now

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Jim Cramer’s top 10 things to watch in the stock market Monday

My top 10 things to watch Monday, August 14

1. It’s a big week of retail earnings. Is Target (TGT) undervalued? Is Walmart (WMT) overvalued? Is Club name TJX Companies (TJX) going to start with its usual up two points and then cascade down two? That’s what you need to be ready for. TJX and Target report second-quarter results on Wednesday, while Walmart reports on Thursday.

2. Morgan Stanly on Monday names Club holding Nvidia (NVDA) a top pick, while predicting a beat and raise when the company reports second-quarter results on Aug. 23. But I really want to warn people that I don’t think it’s ready to be bought.

3. Mizuho on Monday raises its price target on Amgen (AMGN), a very low-risk pharmaceuticals company, to $223 a share from $214, while maintaining a neutral rating on the stock. Elsewhere, Jefferies raises its price target on Amgen to $310 a share, up from $275, and reiterates a buy rating.

4. U.S. Steel (X) rejects an unsolicited takeover bid from rival Cleveland-Cliffs (CLF) that would have valued the former at roughly $7 billion. Cliffs is willing to buy anything. But why would the Federal Trade Commission ever allow this? U.S. Steel said Sunday it’s reviewing its strategic options.

5. Citigroup on Monday downgrades Urban Outfitters (URBN) to neutral from buy ahead of the clothing retailer’s second-quarter earnings on Aug. 22, while raising its price target to $40 a share, up from $36. The firm expects URBN to deliver an earnings beat, but thinks market expectations are too high going into the print. I like this company and find this downgrade disturbing.

6. Following a red-hot initial public offering last month, Morgan Stanley on Monday initiates coverage on beauty-and-wellness company Oddity Tech (ODD) with the equivalent of a hold rating and $57-a-share price target. The bank cites “strong long-term revenue growth prospects” for Oddity, but thinks the positives are already priced into the stock’s valuation.

7. Bernstein on Monday downgrades hotel chain Marriott International (MAR) to market perform, or neutral, from outperform, arguing the stock’s short-term upside is limited by its increased valuation this year and a slowdown in the U.S. luxury space. But the firm increases its price target on Marriott to $218 a share, up from $204.

8. Mizuho on Monday raises its price target on restaurant-management-software firm Toast (TOST) to $30 a share, up from $27, while maintaining a buy rating on the stock, following its “very strong” second-quarter results. Baird, conversely, designated Toast a “bearish fresh pick” following its big run of late. The firm has a neutral rating on the stock, with a price target of $25 a share.

9. China’s Country Garden, the country’s largest private real-estate developer, suspends trading of its onshore bonds on Monday, in a sign it could soon move to restructure its debt. Shares are down roughly 17%, weighing heavily on Hong Kong’s Hang Seng Index. The news is the latest sign Beijing will likely need to step in to shore up China’s beleaguered real-estate sector.

10. Piper Sandler on Monday raises its price target on Club name Coterra Energy (CTRA) to overweight, or buy, from neutral, on expectations for “strong execution across the portfolio.” The bank increases its price target on the oil-and-gas firm to $35 a share, up from $30.

And remember to tune into the Club’s Monthly Meeting on Thursday at 12:00 p.m. ET.

(See here for a full list of the stocks at Jim Cramer’s Charitable Trust.)

As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade.

THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, TOGETHER WITH OUR DISCLAIMER.  NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB.  NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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These non-tech stocks are ‘back from the dead.’ Here’s where we stand

Workers walk towards Halliburton Co. “sand castles” at an Anadarko Petroleum Corp. hydraulic fracturing (fracking) site north of Dacono, Colorado, U.S., on Tuesday, Aug. 12, 2014.

Jamie Schwaberow | Bloomberg | Getty Images

A number of Club stocks that were unloved on Wall Street earlier in the year have seen their fortunes rebound in recent months, including oilfield-services firm Halliburton (HAL) and industrial Caterpillar (CAT) — creating potential opportunities to lock in gains.  

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Dollar General’s new Popshelf stores chase inflation-weary shoppers in the suburbs

HENDERSONVILLE, Tennessee — Dollar General‘s next big strategy for growth is tucked in a strip mall in suburban Nashville, and it is coming to other cities soon.

It’s a new store called Popshelf. Over the past two years, the Tennessee-based discounter has tested the store concept, which caters to suburban shoppers with higher incomes, but sells most items for $5 or less.

A wide range of merchandise fills the shelves, including holiday-themed platters, party and crafting supplies, novelty foods such as gourmet chocolates and Portobello mushroom jerky, and gifts like dangly earrings, lip gloss and toys. It’s designed to be a treasure hunt that keeps shoppers coming back.

Now, with inflation still high, Dollar General is ramping up its plans for Popshelf. It aims to double the banner’s locations to approximately 300 stores next year. Over the next three years, it plans to grow to about 1,000 locations across the country. Eventually, it sees an opportunity to reach about 3,000 total locations. It is also testing mini Popshelf shops inside of some of its Dollar General stores. So far, it has about 40 of those shops.

But Popshelf will have to prove it can hold up in a tougher economy. Walmart, Best Buy, Costco and others have warned of weaker sales of discretionary items as consumers spend more on necessities. Target recently cut its holiday quarter forecast, and Kohl’s pulled its outlook, citing middle-income consumers who feel stretched.

On Dollar General’s recent earnings call, CEO Jeff Owen said even customers who make $100,000 a year have been shopping at its stores.

Chief Merchandising Officer Emily Taylor said Popshelf can draw spending-conscious shoppers by offering items that don’t cause guilt.

“The fact that we have such great value across a lot of these categories gives our customers at Popshelf an opportunity to really treat themselves at a time where they may have a difficult time doing that in other locations,” she said.

Higher incomes, higher profits

Popshelf is designed to drive higher sales and higher profits than the Dollar General store banner. It has more general merchandise, which typically has higher margins than food. Each Popshelf store is projected to hit between $1.7 million and $2 million in sales annually with an average gross margin rate that exceeds 40%.

In the third quarter, Dollar General’s gross profit as a percentage of net sales was 30.5%. That includes all of its stores, but the vast majority are under the namesake banner. It does not disclose annual or quarterly sales on a store level.

By the numbers

POPSHELF

  • About 100 stores in nine states
  • Carries mix of home goods, seasonal decor, party supplies, crafts and toys
  • Most items for $5 or less
  • Suburban locations
  • Draws shoppers with a household annual income from $50,000 to $125,000

DOLLAR GENERAL

  • About 18,800 stores in 47 states
  • Carries many everyday items, such as food, cleaning supplies and paper products
  • A mix of price points, with about 20% of items for $1 or less
  • About 75% of stores are in small towns or rural areas with 20,000 people or less
  • Core customers have an annual household income of $40,000 or less

Source: Dollar General

The new store concept also courts a wealthier customer who lives in the suburbs — like a busy mom who is juggling a couple of kids, said Tracey Herrmann, senior vice president of channel innovation. That customer may need to buy toothpaste and cleaning supplies, but she wants to go a place where she can browse and toss fun items into her basket as well, Herrmann said.

Inside of Popshelf stores, the brands and items on shelves reflect that customer. For example, stores sell food and household brands often carried by higher-end grocers, such as Mrs. Meyer’s hand soap, Amy’s frozen meals and Tillamook cheese. It has a selection of global snacks, such as Pocky and Hello Panda. And it has specialty kitchen and baking items, such as inexpensive spices and unique condiments.

It also has exclusive brands, such as its own line of low-priced candles, room sprays and diffusers — including a signature scent, Citron Berry, which fills up its store. It carries some private brands sold by Dollar General, such as Believe Beauty, a makeup brand that’s been touted by influencers, including Bethenny Frankel of Bravo’s “The Real Housewives of New York City.”

It has rotating seasonal items, depending on the time of year, such as Christmas decor, pumpkin-themed items, bright colors for Easter and beach towels in the summer.

Herrmann said the store’s name was inspired by that mix of merchandise, which constantly gets refreshed.

“We believe the product pops off the shelf and really brings itself to life without us really even having to do much with it,” she said.

Discounters’ time to shine

Over the past several years, John Mercer, Coresight’s head of global research, said those value-conscious retailers have benefited from millennials buying homes and starting families as they juggle expenses such as college debt. Plus, he said, members of the second-largest generation — baby boomers — are looking for value as they retire and live on a fixed income.

Inflation has become an additional tailwind for the off-price and discounter sector this year and into 2023, he said.

Dollar General has historically performed well in economic downturns. It posted same-store sales gains during every quarter of the Great Recession in the late 2000s. On the other hand, Target, Macy’s, Nordstrom and Kohl’s were among the retailers with seven or eight quarters of negative same-store sales in that period.

Investors have been bullish about Dollar General. Shares of Dollar General have risen about 4% so far this year, as the S&P 500 Index has fallen by about 16% in the same period.

Corey Tarlowe, a retail analyst for Jefferies, said Popshelf may face some pressure in the near term as consumers think more carefully about purchases. Yet he said the tight labor market means most shoppers are still employed. Plus, he added, Popshelf’s middle- or upper-income consumer likely has a larger budget and bigger bank account.

Tarlowe said the store’s wide mix means it can steal away share from many different retailers, including crafting stores like Joann, Michaels and Hobby Lobby, pet stores like Petco, drugstores like CVS and Walgreens and dollar stores like Five Below and Dollar Tree.

“At the end of the day, it’s all about the value messaging,” he said. “That’s the core of it. It’s Dollar General pricing wrapped in a pretty bow.”

–CNBC’s Nick Wells contributed to this report.

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