It was the retail show of the decade and 700 vendors, designer executives, investors, merchants and retail analysts were being razzle-dazzled.
Ron Johnson’s presentation in January 2012 on reinventing J.C. Penney‘s prosaic selling floors into a “specialty department store” with 100 brand shops, a town square, coffee stops, gelato stands, state-of-the-art technology and no more coupons, had won over the audience, leaving them wide-eyed and impressed.
Except for Walter Loeb — the retail analyst and consultant oft regarded as the “dean of retailing.” He was spotted exiting Pier 57 on Manhattan’s West Side, smiling and jovial as usual, though unlike the majority of the exiting crowd, expressing doubts.
“Ron Johnson put on a good show. I thought the ideas were great,” recalls Loeb. “Change was needed, but I was concerned that the customer would not understand what he was engineering, that the changes were too abrupt and did not apply to the J.C. Penney customer, which I saw as value-oriented and responding to sale events.
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“I try to understand stores from the customers’ point of view. That’s what I do,” Loeb says. “I had known Penney’s for many, many years, back to when they were still headquartered in New York. I admired their fashion coordination, color coordination, the approach they had. They coordinated home fashions very well and developed strong franchises for their own brands such as Stafford and St. John’s Bay.”
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Loeb made the call that Johnson’s radical transformation for Penney’s, which led to Johnson getting fired, would be a bust. “I turned out to be right because customers stayed away in droves.”
Walter Loeb has made a career out of calling it right and frequently calling it ahead of the pack. His blue-chip reputation as a retail analyst began at Johnson Redbook Service and blossomed at Morgan Stanley, where he worked for 16 years and became a principal. After reaching retirement age and leaving Morgan Stanley, he formed the Loeb Associates consulting firm. He’s served the board of Hudson’s Bay Co., Wet Seal, Gymboree, ProfitLogic, Motherswork, Investcorp and other companies; booked speaking engagements at universities and corporations around the country and penned a newsletter.
“I guess the biggest call, very early on, was with Wal-Mart and Sam Walton. I recommended Wal-Mart when it was doing $273 million in annual sales in the early Seventies,” Loeb says.
“I also recognized the growth potential of Home Depot very early, in the early Eighties.
“Sure, I made many errors — maybe I lingered with Sears for too long and saw potential….I have been told I was 86 percent right, so I must have made 14 percent bad decisions,” Loeb notes.
At 91 years old, Loeb moves more slowly these days with the help of a cane, yet he hasn’t let up on monitoring the industry. His pointed blogs on Forbes.com appear frequently; he attends industry events, and the National Retail Federation honored him with a 2016 Influencer Award, for impacting the industry for decades.
What’s Loeb’s secret sauce, giving him those sharp powers of observation? In a lengthy interview, Loeb cites a blend of 20 years’ worth of actual retail experience — most analysts don’t have any — and a drive to get to know the retailers, not just their stores. He forms relationships, tries to understand executives and what makes them tick, and gets the access.
“The fact that I had been a retailer, that I was on the firing line, has been important for me to make decisions, but I will come back to the fact that when I analyzed a retailer and its management, I had to trust management,” Loeb says. “I have often learned about their families and I told them about my family. At one point, I could reach almost anybody in the industry. I did not go to business school, but I worked for Macy’s and May Co. and as a result, I knew and understood the problems of seasonality and I was talking to managements more as a peer than as an analyst.”
For Loeb, reviewing the data on companies is standard procedure. “I have done a lot of calculations. You have a spread sheet and look at past performance. It is a guide to the future, but not necessarily the answer to what is going to happen.”
During his decades on the job, he spoke to as many people in the industry as possible to form an analysis.
“It’s like a mosaic. I take a piece here. A piece there. I hear something there. I try to reach a reasonable conclusion. If I find toys are selling at a store, then I apply it to other stores that sell toys. I am always trying to find out what is selling, what isn’t. Very often by learning something from one company, I can apply it to another.”
To better understand retailing, Loeb examines other sectors, like automobiles. “If you buy an auto, you don’t buy a couch at the same time. There are other classifications that are affected by strong durable sales. Unemployment is a major factor. I monitor it all the time, particularly since the government often changes the estimate on unemployment.”
On giving investment advice, he’s guided by a “three-legged stool….First, I had to know the company had a direction that is very clear and visible. Second, that it had underlying opportunities for future growth, and the third goes back to management — its trustworthiness. I look for companies that have a vision of the future. There are very few companies that have time to formulate a vision because they are constantly fighting the current economic environment.”
He’s also got a personality that people respect — affable yet sometimes blunt, outspoken yet always in a civil manner.
“When you are running a company, a lot of people on the inside and the outside say a lot of things you want to hear, but not Walter. He can be brutally honest, sometimes painfully so,” observes Myron “Mike” Ullman 3rd, former Penney’s chief executive officer, who met Loeb in 1988 when he was working at Wharf Holdings in Hong Kong and soon to join Macy’s Inc.’s executive team. “Walter was the most prominent retail analyst on the Street and I was trying to get insight into Macy’s and department stores. I have been in touch ever since. At Penney’s, he gave me a tough time on our approach to some things, like designers and Sephora, but he’s got great insights, lots of wisdom and a personality that made you want to learn from him. He hasn’t changed much. He is very resilient at his age. He still gets out and gets it done.”
“Walter has earned the stripes of the elder statesman of analysts,” says Michael Gould, former Bloomingdale’s chairman and ceo. “Lots of people have very nice careers and have done interesting things, but Walter, after he left Morgan Stanley, created something new for himself,” forming Loeb Associates. “He has stayed very relevant in the field. Last summer, I called him one night to get together. ‘No,’ he told me, ‘I am going to Germany to see Galeria Kaufhof,'” a consulting gig at the time. “And I thought, does he really need to do that at 90 years old, at the end of the summer? But that’s what keeps you young — what keeps the mind working.”
The “great lesson” of Loeb, Gould adds, is similar to the lesson learned from the late Marvin Traub, who proceeded Gould as Bloomingdale’s ceo. “After their careers came to a close, Marvin and Walter stayed relevant and connected to the industry. Leaving retail behind, Walter is interested in so many different things — theater, music, travel and religion courses at Central Synagogue.”
Loeb also speaks five languages; once wrote classical music reviews for a magazine called Musical Leader; is partial to Chinese food, and he’s a lover of art — very specifically, southwestern Native American art.
Entering his 3,400-square-foot Beaux Art apartment on Riverside Drive, there’s a big moose head on the wall by the foyer — “It’s just a midsize moose,” quips Loeb.
Taxidermy isn’t his thing, though it does feel like the moose is watching over the 2,000 or so pieces of Native American artwork he and his wife, Phyllis, have accumulated from many trips to the Southwest, and have displayed in every room: pottery, wood sculpture, baskets, paintings, stone carvings of animals, carpet weaves and about 400 kachinas, all evoking regional imagery, sacred traditions and ceremonies and spiritual beliefs.
“One of my grandchildren, when she came over, said, ‘Grandma! You live in a museum!'” Phyllis says.
“I love the people, the Southwest environment,” Loeb explains. “It’s artistically exciting — and we felt we got to know the artists. We would meet the artists and collect directly from them.”
Phyllis then points out one of her husband’s favorite pieces. It’s a painted wood sculpture by Dan Namingha, a member of the Tewa-Hopi tribe who lives in Santa Fe. “This is a very special piece. It’s been in some museums,” Loeb notes. There are also pieces by Allan Hauser, Clifford Beck and Mamie Deschillie, among other artists. “It’s a feeling we have for it — it’s cultural, anthropological.”
Loeb, who has been married for 58 years, has three daughters and six grandchildren, was born in Germany in 1925 in Darmstadt, and lived mostly in Frankfurt growing up. His family escaped the Holocaust by emigrating to Italy.
“My father was a traveling salesman. He sold buttons. There were very few zippers at the time,” Loeb recalls. “He was a very caring man and very decisive for his family and his extended family. He encouraged people to get out of Germany in time. Most of our family was out when the Kristallnacht happened. My family was never religious but it was observant. We belonged to a liberal synagogue in Frankfurt.”
When Italy sided with Germany in the war, Loeb’s family emigrated again to Cuba and finally the U.S. After graduating from high school in 1943, Loeb became a citizen and was drafted. He participated in the Normandy invasion, landing on Utah Beach. “I was not scared. I was just obeying orders. There was less thinking and more just following orders.”
His assignment was to unload bombs for an airfield established in France, until a German bomb exploded, busting an eardrum, so Loeb was evacuated to England. “They were afraid a broken eardrum might be affected by gas.”
He was reassigned to advanced communications and asked to translate a German engineering book on the Remagen Bridge, which Hitler intended to destroy. After Loeb translated the book, the Allies were able to deactivate explosives concealed in the bridge, enabling soldiers to cross the Rhine River into Germany.
Long past the war years, Loeb’s patriotic feelings endure. For many years, he advised the Army Air Force Exchange Service on a volunteer basis. “I believe very strongly in being a U.S. citizen and doing things for my country,” he says.
In January 1946, Loeb returned to the U.S. and attended New York University, where he majored in marketing and history. His father wanted him to join his business — which was jewelry at the time — but Loeb pursued retailing his own way. “I wanted to be independent.”
Loeb started in the advertising department at Goldblatts in Chicago, shifted to Macy’s advertising department in New York and later became a section manager in the holiday toy department. “I was in charge of wind-up toys. I enjoyed being with the people.” Subsequently, he became a home-furnishings department manager at a former Macy’s in Brooklyn. “I was very active moving hassocks around the store. I hid them in fire escapes because I had more hassocks than I was supposed to have, and I was successful selling them. Most people don’t even know what a hassock is anymore.”
Loeb felt “the excitement of selling and knowing what the customer wants. I felt I had a strong relationship with customers and with sales associates who had to support you whatever you were doing.”
A hanker for returning to Europe motivated him to work for a general merchandise retailer called PK Halstadt before returning to the U.S. as a financial analyst for the Johnson Redbook Service. In 1974, he joined Morgan Stanley as a retail analyst, becoming only the second Jew hired by the firm.
Retail doors swung wide open for him.
“When Sam Walton was alive, it was a close relationship,” Loeb says. “I remember him driving me back to my hotel in Arkansas, when he pulled out a shotgun and started shooting at his dog, yelling ‘I told you to stay home.’ He wasn’t trying to hit the dog, but he was shooting.”
Loeb was engrossed by Walton’s “concentric” expansion strategy. “He would [build] a distribution center and grow stores around it. He had a very specific way of growing. He had a vision of expanding through the U.S., but his vision did not include the world.”
On the personal side, “Sam was a workaholic,” up at 4 a.m. and by 6 he had read all the internal reports of his stores. “He was way ahead of everyone else and in the stores very much. He knew everyone’s name. I saw how he motivated his company, how he created a very exciting new venture. He believed in people — his associates. Once he asked me to give him $2. He never had any money in his pocket.”
Loeb’s list of prominent retailers and industry executives he knows or has known well includes Stanley Marcus, Gordon Segal, David Glass, Bruce and Blake Nordstrom, Lew Frankfort, Burt Tansky, Leonard Lauder, David Farrell, George Meyer, Edward Finkelstein, Terry J. Lundgren and Olaf Koch.
Though he’s combed stores all over the world, he considers one his most interesting assignments being a board member at ProfitLogic, which provides “merchandise optimization” solutions helping retailers plan, allocate and price merchandise. “The company was selling a new idea to customers; they were trying to maximize sales and profits through sophisticated computer analysis. They had a group of Ph.D.s working on ideas. I explained retailing to them. I also helped the company understand retailers and how to become important to companies.”
These days, Loeb comes down hard on retailing. He says department stores are “stuck in having a never-ending promotional cycle where it’s always about topping last year’s performance, forcing them to be more aggressive every year. I hoped they would stop some promotions, but it is very hard to drop millions of dollars of business and still be profitable. I expect the promotional environment to continue for a long time.”
Yet he’s not one of those pundits who regards department stores as dinosaurs. “They help customers buy coordinated outfits. One-stop shopping is still relevant. Department stores are strongest for selling watches, accessories, coats and some women’s apparel and still have in many cases strong home departments.”
Still, Loeb believes that stores, generally, no longer have the ability or the staff to be fashion authorities; that more retailers should be into fast fashion; that food halls and restaurants should be a bigger part of the offering and so should technology products. “Whenever Apple introduces something, the apparel business slows down because kids don’t buy apparel and technology at the same time, just as families don’t buy automobiles and furniture at the same time.”
He says outlets remain very important and singles out T.J. Maxx and Nordstrom Rack as most successful. “I am less optimistic that Macy’s Backstage will be meaningful for Macy’s except as an additional promotional vehicle in a promotional store. Let’s give it more time.”
He says he’s concerned about the momentum of sales in the domestic division of Wal-Mart, but “it is still a great company.” He sees Amazon as a threat to all major retailers and likes the management and direction of Nordstrom. “They have a young attitude and are experimenting with new ideas.”
He said he felt surprised by the downturn at Macy’s and believes it reflects a need for new initiatives. And a few decisions by Hudson’s Bay Co. surprise him, namely deciding to open Hudson’s Bay stores, not Kaufhof stores, in Germany, and bringing Saks Off 5th to Europe. “Saks Fifth Avenue is not very well-known in Germany,” Loeb contends.
On Sears, “I was a great admirer,” particularly when Sears in the early Eighties launched a line by Cheryl Tiegs, the first prominent model to do a collection, to project a friendlier image to women. Now Loeb is “very negative” about Edward S. Lampert, chairman and ceo of Sears Holdings Corp. “Sears was sinking before Eddie bought it, but Eddie didn’t rescue it. Combining with Kmart made no sense and Sears today is really managed as a portfolio company trying to sell off things. Diehard, Craftsman and Kenmore may be for sale and I don’t agree with that. It takes away the only labels people continue to trust in the store.”
Loeb does see some “big ideas” he likes. “I am applauding [Penney’s ceo] Marvin Ellison’s decision to revive appliances in the stores. I am concerned that it will be profitable, though he is trying to find a new way to create excitement in the stores….I also applaud Brian Cornell,” chairman of Target Corp. “He’s making the food there more attractive to customers. Macy’s coming out with an Elton John/Lady Gaga collection — that’s exciting. When Trump came out with one, they blew it out of proportion.
“The future has to be about more innovative apparel, innovative furniture and a vision that drives customers to the stores,” Loeb says. “The current environment is such that people are buying too much on the Internet then running into the store to pick it up and get out rather than shop. There is very little that keeps people in the stores.”