Macy’s to delay store closures and launch third-party market next year

Dive brief:

  • Macy’s suspends its plans to close 125 stores, announced last year as part of its Polaris turnaround, telling analysts Thursday that physical locations have proven to be critical for digital sales as well as physical sales.

  • Following a tactic employed by Amazon, Nordstrom, Walmart and Target to varying degrees, Macy’s also said Thursday that it launch a third-party marketplace for Macy’s and Bloomingdale’s customers in the second half of next year.

  • The announcements came as the department store said third-quarter net sales rose 36.3% year-on-year and 5.2% from 2019 to $ 5.4 billion. Store sales, including rental sales, increased 35.6% and 8.7% from 2019. Net income reached $ 239 million from a loss of $ 91 million annually last, up from $ 2 million two years ago.

Dive overview:

Macy’s is adding another selling format to its ecosystem, this time an “organized digital marketplace” which CEO Jeff Gennette says will allow the retailer to continue its e-commerce expansion.

“We can increase digital efficiency faster, we can generate more profitability, we can get a fuller and broader assortment and, you really know, respond to new brands and emerging trends for a customer who relies on us to. be able to do that, “he said of the market on the company’s conference call.

The third-party platform joins the company’s ever-evolving network of sales approaches. This includes three levels of full-line stores: flagships like those in New York and San Francisco, “Growth150” stores (refurbished locations representing half of its revenue) and “neighborhood stores”. The off-price backstage, mostly located in spaces in Macy’s locations, is also opening more stand-alone stores, and the company intends to expand its smaller mall-based marketplace by Macy’s and Bloomie’s, reiterated leaders Thursday.

While its Polaris strategy initially called for a significant reduction in its mall-based fleet, this is now under consideration as the department store discovers the role of stores in driving digital sales. But that will only work if stores are marketed much better than they currently are, according to GlobalData chief executive Neil Saunders. Macy’s owns a lot of its malls and probably enjoys advantageous leases when they don’t because of their importance as anchor points, which is why they are financially stable. “even as the business declined, ”he said.

It is very true that physical stores are important to omnichannel, both in terms of supporting brand fulfillment and boosting the brand, ”he said via email.“ However, for do the brand justice, stores need to look good and compelling. Right now, I would say that due to the condition they are in a lot of stores, Macy’s image is damaged. “

The department store’s performance in the third quarter exceeded the expectations of many analysts, although executives warned that this could be due to the fact that the first holiday purchases resulted in seasonal sales in the period, which in turn could adversely affect fourth quarter results. Still, Macy’s underperformed some competitors, including Dillard’s and Target, over a comparable time frame. Saunders doesn’t think its next market will help it catch up, calling it “one of the last examples of Macy’s misguided thinking. ”

“While there is nothing inherently wrong with the idea, it’s not really groundbreaking since every retailer is now adding markets,” Saunders said in comments sent via email. “It’s also ludicrous that Macy’s talks about using the market to expand choice in an organized fashion when one of the biggest issues right now is its inability to create a compelling proposition from its own rambling and fuzzy assortment.”

With consumer spending on the rise in the United States as the pandemic eased and the economy improved – retail sales jumped more than 11% year-over-year over the course of the past two months – retailers, including Macy’s, are taking a push. If that eases, store closings could be back on the table, according to Saunders.

“Once we move into next year and the margins and sales growth come under more pressure – and Macy’s will likely revert to weaker performance – they will likely look at stores more critically and less. optimistic, ”he said.

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