Macy’s drop in sales shows virus toll on retail
Macy’s, the retailer that also owns Bloomingdale’s and Bluemercury, said Tuesday that its sales last year plummeted 29 percent, highlighting the toll that the pandemic has taken on mall chains and the uncertainty around how traditional retail will recover in a post-pandemic world.
Macy’s said that sales fell to $17.3 billion in the year ended Jan. 30, and that it posted a net loss of $3.9 billion, compared with a $564 million profit the prior year. The company said it “anticipates 2021 as a recovery and rebuilding year” after a better-than-expected holiday selling season, with momentum building in the second half of the year. Fourth-quarter sales declined by 19 percent from a year earlier.
With more than 700 stores, Macy’s is often viewed as a barometer for the health of department stores, malls and American consumers. On Tuesday, executives emphasized that Macy’s was building its digital business, which it expects to reach $10 billion in sales in the next three years. It is moving out of unfavorable U.S. malls as part of previously announced store closures and expanding its off-price chains like Macy’s Backstage, which aims to compete with T.J. Maxx. And it is testing smaller stores called Market by Macy’s and Bloomie’s away from traditional malls.
“We’ve got a lot of customers that don’t want to go to a mall, or the best mall in that town is not near their home, so they’re going to lifestyle centers, strip centers; they’re going to outlets,” CEO Jeff Gennette said in an interview Tuesday. “Macy’s and Bloomingdale’s, by and large, do not play there, and that’s what we’re testing.”
Macy’s business has been heavily affected by the drop in apparel sales, as many occasions that require people to dress up simply did not happen during the pandemic. Gennette said that dressy clothing remained “very depressed” and that he did not anticipate a resurgence in such items until the fall, although the company had a “ramp-up” strategy in place with vendors to lean into new inventory if it saw signs of improvement sooner.
The company, which is based in New York, has been looking for “clues on what’s going on with wedding dates, what’s going on with restaurant reservations, what are the signs that communities are starting to open up,” he said.
“I don’t think I see it for the summer,” Gennette said. “I expect it’s going to be later, and it’s something we react to in the third quarter or fourth quarter.”
He said that apparel would play a less important role at Macy’s going forward. The company said on its earnings call that sales had jumped in areas like home goods, luxury skin care, fragrances and fine jewelry.
Even before the pandemic hit, Macy’s was under strain. In February 2020, the company said that it planned to close about 125 of its least productive stores over three years and cut about 2,000 corporate and support function positions. Sales in 2019 had fallen to $24.6 billion from $25 billion a year earlier, and the company’s declining stock led to its removal from the S&P 500 last year. The job and store cuts were part of a three-year plan to return Macy’s to sustainable, profitable growth, called its Polaris strategy, in a reference to its star logo.
Many consumers stayed away from malls and department stores in the past year and substantially changed their spending habits in a newly isolated world. Macy’s place in American culture also took a hit, as the outbreak reduced its annual fireworks display and Thanksgiving Day parade in New York City.
Outside of malls, Macy’s and Bloomingdale’s flagship stores in major cities have struggled mightily with a drop in foot traffic from office workers as well as the loss of international tourists. Gennette noted that Macy’s was not requiring its own corporate staff to return to the office until the fall, and even then, it anticipated a “hybrid culture” for in-office work.
The return of tourists was likely to come later, he said.
“With our modeling, we don’t expect that to come back until the very end of 2021, but really, starting in 2022,” he said, adding that the company would continue to monitor signals like advance bookings, plane fares and hotel occupancy rates.
Until the tourists and workers return, he added, he expected stores in cities to “continue to be challenged.”