Depart­ment stores dy­ing? Don’t tell that to Macy’s

USA TODAY US Edition - - MONEY - Charisse Jones

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.

AFP/GETTY IMAGES

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