M: Leadership Chg Net Negative

Takeaway: Bulls will gloss over the mgmt chg, but Cole was the 2nd highest paid person at M, and was there for 40 years. He matters.

Macy’s announced after the close that Thomas Cole, Chief Administrative Officer, will be leaving the company in May 2013. Our sense is that Mr. Cole is leaving on his own accord and under good terms after 40 years at the company. That said, make no bones about it… Cole is important to the organization. Formerly a Vice Chair, he is responsible for orchestrating everything from internal audit, human resources, external affairs, systems, technology, logistics, credit, non-merchandise purchasing, sustainability, and store planning, design and construction. There’s a couple of other functions as well – all of which have been spread out to three existing and one new individual in the Macy’s organization.

The bulls – if they acknowledge this announcement at all -- will tout that this is a company with a deep bench, and that they are not concerned to see such an important executive leave the company.  The reality is that if there is any positive it is that there will be $2-3mm in EBIT freed up with the departure of his compensation (only half a penny per share). Keep in mind that Cole was the second highest paid person in the company – making 20% more than CFO Karen Hoguet, the primary interface of the company to the Street.

Our sense is that whenever we see someone leave who has so many responsibilities and has greater tenure than anyone else on the org chart – it simply cannot be glossed over.

CEO Lundgren said as much in his quote
“Tom’s influence has been particularly profound over the past seven years as we integrated the acquisition of The May Department Stores Company, migrated to the nationwide Macy’s brand, developed new business and organization structures, aggressively pursued our omnichannel vision and improved our customer shopping experience. Tom played a key role in these subjects and many, many more.”

Macy’s remains one of our top short ideas.