After decades of being derided as a slow-moving, overstored retail dinosaur, Macy’s is transforming, regaining relevance, and capturing more shoppers in the process.
In the works: a complete overhaul of Macy’s private brand portfolio; additional Bloomies and Market by Macy’s off-mall specialty stores; “fresher and more current” holiday 2022 merchandise thanks to improved inventory management and greater liquidity enabling faster receipts of on-demand items, and the integration of the marketplace business model to the Macy’s and Bloomingdale’s e-commerce websites to introduce categories and brands not carried before.
“In two-and-a-half years we have expanded our customer base. We have now 44 million customers. That’s strong for us. We have a market-leading digital site. We are number two in apparel, home and accessories,” second to Amazon, Gennette said. Macy’s stock is trading at around $19, well below the 52-week high of $37.95, though some retail analysts believe it’s a good time to buy the stock on the cheap. Competitors, namely Nordstrom, Kohl’s, Amazon, Target and Dillard’s, are also trading down amid the volatile stock market and uncertain future. Department stores are tough, complicated businesses to manage that can generate a lot of cash but not necessarily much profit.
Gennette said through the pandemic, Macy’s cut annual costs by $900 million and extended debt maturities out while retiring “stacks” of debt. “We have deployed a really healthy capital allocation strategy, and we are now back to where we wanted to be in terms of investment grade profile.” “When you look at the composition of our SG&A [selling, general and administrative expenses], a lot more of that is on our front-line colleagues or what we do in our warehouses or in our call centers, making sure we’re ready for the customer but doing it with as lean of a management organization that we can,” Gennette said.
“We recognized a number of years ago that we were overstored, that the stores we did have were uneven in the experience they provided to customers. Over the years we have shed a gigantic chunk of the portfolio, a couple of hundred stores. We are down to about 50 remaining that we said we would close over time. We are chipping away at that. This past year we closed six. I do believe that we are coming to a point where the stores we have are in the most important malls.
The investment in toys leads to the question of what other voids in the merchandising could be filled. Electronics would be a possibility. “We can be a one-stop shop if we do it right. That is how a modern department store is going to behave,” Gennette said. The CEO said private brands represent 16 percent of Macy’s total business and that of all the businesses at Macy’s, private brands would grow at one of the fastest rates. Another 10 percent plus of Macy’s volume is generated by exclusive merchandise from brands that aren’t exclusive to the store, bringing Macy’s level of merchandise exclusivity to more than 25 percent of the assortment.
“It is a big change,” Gennette acknowledged. “But what I love about Market by Macy’s is we are not opening them with these anchors of branded shops that lock you in for a period of time. There is so much flexibility in these. You can only tell so much of the story in 30,000 square feet. You’ve got to make sure you remain flexible. With the beauty floor, we’ve laid out branded experiences but everything else is highly flexible.
Market by Macy’s has an open environment, a racetrack layout, a fitting room complex in the middle, At Your Service for returns and online pickups, and associates that roam the floor with customers.Bloomies, the scaled-down, curated version of Bloomingdale’s emphasizing luxury, contemporary and casual styles, opened in the Mosaic District lifestyle center in Fairfax, Virginia, last year and will open a second Nov. 17 at the Westfield Old Orchard Mall in Chicago.
In recent years women’s apparel has been a weak spot at Macy’s, though when asked about that Gennette replied: “Women’s is one of our strongest businesses. Part of that is lapping a tough period. We are not under-penetrated in women’s, as a percent of our total business, but we lost market share we know we can get back. We do more market share in men’s apparel than we do in women’s apparel. That gives us a really good calling card to go after the women’s business more aggressively.
That never happened, but he briefly left Macy’s to try specialty retailing with FAO Schwarz, where he opened the flagship in Union Square, San Francisco. “After eight months I realized specialty retail was not right for me, so I came back to Macy’s as the store manager in Santa Rosa [California].
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