Department stores dying? Don’t tell that to Macy’s
Don’t write off department stores just yet. Traditional retailing may still be under pressure from online retailers such as Amazon, but results released Wednesday by Macy’s show there’s still plenty of hope as the sector evolves and transforms itself.
Macy’s experienced a sales surge at the start of the year as customers flocked to buy products ranging from perfume to hand bags, boosting the retailer’s profits and defying low expectations of some industry observers.
Sales were up 4.2% in the first three months of the year, reversing a mostly downward trend the retailer has experienced over the last four years. Macy’s net income was $139 million in the first quarter, up from $78 million in the same quarter last year. The results handily beat expectations of analysts surveyed by S&P Global Intelligence.
“We exceeded our expectations and saw strong performance across all three brands — Macy’s, Bloomingdale’s, and Bluemercury,” Macy’s CEO Jeff Gennette said in a statement. “These positive factors give us confidence to raise both our sales and earnings guidance for the fiscal year.”
For decades, Macy’s was the standard bearer for the elegant department store, but it has been struggling to reinvent itself in an era when convenience is king and customers are increasingly content to tap a keyboard and have shoes, purses and clothing brought to their front door.
The retailer has pared stores and slashed thousands of jobs as it struggles to boost profits. But some industry watchers have fretted that’s not enough. In a note to investors last week, Morgan Stanley said the chain might need to pick up the pace.
“Even though Macy’s is closing stores proactively, it may not be doing so quickly enough,” the note said.
Overall sales are predicted by management to be flat or slightly down this year. Yet Macy’s is succeeding by playing to the basics, such as its loyalty program. The retailer’s new Star Reward loyalty program is paying off, with its highest-level members spending more. And last week, the program began including customers even if they did not have or use a Macy’s credit card.
Macy’s Backstage, the retailer’s offprice concept that sees especially brisk sales in the shoe and home categories, continues to expand. With the goal of opening roughly 100 more locations this year, the retailer unveiled 18 new stores in the first three months of 2018 and plans to launch roughly 40 more in the second quarter.
Macy’s is also aiming to better compete with Amazon, as well as its traditional retail peers, by bringing technology to its aisles, and trying to make the in-store experience as much of a draw for customers as the clothing and accessories lining the racks and shelves.
By the end of this year, shoppers at all Macy’s stores will be able to use their smartphones to scan and pay for most products with the store’s app.