USA TODAY International Edition
Investors spooked as Macy’s struggles with sales growth
Macy’s sales surge slowed in its most recent quarter, signaling that the payoff from its efforts at reinvention may have a ways to go.
The department store now allows-shoppers to check out via their smartphones, has expanded its lower-cost offerings and is experimenting with new store designs. Those moves may have helped lead to a slight 0.5 percent increase in sales at stores open for the last 12 months on an owned and licensed basis. But that rise paled in comparison to the start of the year, when sales climbed 4.2 percent, a welcome reversal after the retailer had experienced a downward spiral over the previous four years.
“While there are good reasons for the slowdown in sales growth, and although underlying performance is respectable, the decline in total sales and the virtually flat comparable numbers look bad,” says Neil Saunders, managing director of retail consultancy GlobalData. “This is likely spooking some investors and has raised questions over how sustainable Macy’s recovery is.”
Macy’s, once the standard-bearer of the upscale department store, has struggled to adapt to a new shopping landscape where fewer people trek to the mall, fashion tastes shift in an instant and more Americans embrace the ease of buying everything from shoes to mattresses online or through smartphones.
The company has closed stores and slashed thousands of jobs to cut costs and boost profits. It also has taken a number of steps to cater to shoppers’ desire for speed, convenience and bargains.
Sales were up more than 50 percent on the Macy’s mobile app in the first half of the year, and by the end of this year, the app will speed up the buying process in actual stores when shoppers can use their smartphones to scan and pay for most items.
By fall, customers at 60 locations will be able to see chairs, couches and other pieces of furniture as they would look inside their actual homes through a new augmented reality feature.
And the retailer has been expanding its lower-priced offering, Macy’s Backstage, opening 47 in the most recent quarter, with plans to have 120 open by the end of this year.
“Adding Backstage makes existing stores more productive ... and will bring more customers into the brand,” Jeff Gennette, Macy’s CEO, said in an earnings call with investors.
Macy’s is also trying to ramp up customer loyalty, offering the benefits of its new Star Reward program even to customers who do not have or use a Macy’s credit card.
Macy’s net income rose to $166 million in the most recent quarter, up from $111 million in that same three-month period last year.