Macy’s among end-of-year losers as re­tail’s ris­ing tide fails to float all boats


Macy’s and other mall-based re­tail­ers said sales pe­tered out at the end of the year as they con­tin­ued to lose cus­tomers to dis­coun­ters and e-com­merce, high­light­ing how not all chains are po­si­tioned to ben­e­fit from a strong US econ­omy.

The year-end re­sults — and a weak profit out­look from Macy’s — clouded what have been up­beat ex­pec­ta­tions for the hol­i­day sales sea­son with con­sumers show­ing a hearty will­ing­ness to spend.

The news on Thurs­day spooked in­vestors, who sent shares of Macy’s down nearly 18 per cent, the de­part­ment store’s worst one­day de­cline on record. Ri­val Kohl’s and mall stal­wart L Brands, the owner of Vic­to­ria’s Se­cret, also posted tepid hol­i­day sales, trig­ger­ing a sell-off in re­tail stocks.

“The hol­i­day sea­son be­gan strong — par­tic­u­larly dur­ing Black Fri­day and the fol­low­ing Cy­ber Week, but weak­ened in the mid-De­cem­ber pe­riod,” Macy’s chief ex­ec­u­tive Jeff Gen­nette said.

The neg­a­tive sen­ti­ment weighed on shares of dis­coun­ters like Tar­get and Costco — and yet they have posted strong hol­i­day sales. Those chains, which are less de­pen­dent on ap­parel, and Ama­zon have been tak­ing mar­ket share from de­part­ment stores. Tar­get cited strong de­mand for toys and baby prod­ucts along with sea­sonal gifts.

“The ris­ing tide of re­tail sales hasn’t floated all boats,” Neil Saun­ders, man­ag­ing di­rec­tor of re­search firm Glob­alData, said. “We are see­ing a po­lar­i­sa­tion be­tween win­ners and losers.”

Macy’s said to­tal com­pa­ra­ble sales rose 1.1 per cent dur­ing Novem­ber and De­cem­ber. The chain low­ered its sales and profit fore­casts for the fis­cal full year, which ends in Fe­bru­ary.

The re­tailer has been in­vest­ing in a group of stores it calls mag­nets, adding new light­ing, fix­tures, a bet­ter as­sort­ment of mer­chan­dise and tech­nol­ogy, while try­ing to shrink less-promis­ing lo­ca­tions. But the changes weren’t enough to ac­cel­er­ate growth through what was ex­pected to be one of the most suc­cess­ful hol­i­day sea­sons in years.

“It’s al­most as if Macy’s is two com­pa­nies,” Mr Saun­ders said, not­ing that the mag­net stores had been do­ing well while the rest of the chain had strug­gled. “The other stores are dispir­it­ing and crammed with stock,” he said. “That is the is­sue that Macy’s has got to get to grips with.”

Kohl’s com­pa­ra­ble sales rose 1.2 per cent in Novem­ber and De­cem­ber, but its growth was slower than in the year-ear­lier pe­riod. The com­pany also said it would close two stores and of­fer a vol­un­tary re­tire­ment pro­gram for work­ers over 55. The com­pany sells mer­chan­dise sim­i­lar to Macy’s, though its stores typ­i­cally aren’t lo­cated in en­closed malls.

“The tra­di­tional de­part­ment stores’ days are num­bered un­less they change rad­i­cally,” Craig John­son, pres­i­dent of Cus­tomer Growth Part­ners, a re­tail re­search and con­sult­ing firm, said. Many de­part­ment stores were tied to a for­mat es­tab­lished in the mid-1800s, but con­sumers wanted value, en­ter­tain­ment or ser­vices when head­ing to stores, he said. “If you can’t suc­ceed in an en­vi­ron­ment like this, a strong econ­omy, it’s a prob­lem.”

Tar­get’s sales, in­clud­ing in­store and on­line, rose 5.7 per cent be­tween Novem­ber 4 and Jan­uary 5. The re­sult com­pares with 3.4 per cent growth in the year-ear­lier pe­riod and puts Tar­get on track for its big­gest an­nual sales gain in 13 years, the com­pany said. Costco re­ported this week that its sales climbed 7 per cent, ex­clud­ing fuel and cur­rency fluc­tu­a­tions, in the five weeks ended Jan­uary 6. Both re­tail­ers said strong store traf­fic drove growth over the hol­i­days.

Tar­get and Costco, as well as larger ri­val Wal­mart, have re­ported strong sales in re­cent quar­ters as they have ben­e­fited from low un­em­ploy­ment and US wage gains.

Their suc­cess sug­gests the re­tail­ers that worked to at­tract more shop­pers on­line or in­vested in store op­er­a­tions were able to har­ness ro­bust con­sumer spend­ing over the hol­i­days, even as a stock­mar­ket swoon and a gov­ern­ment shut­down led some in­vestors to worry about an eco­nomic slow­down.


Macy’s low­ered its sales fore­casts for the fis­cal year

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