Macy’s Inc. CEO Tony Spring agrees with many people’s assessment that a great number of its namesake department stores are substandard and deserve to be closed. So Spring, who took on the top job last year, has been closing dozens of stores and focusing on 125 Macy’s locations that the retailer believes have the most potential.
The company’s latest set of financial results, released on Wednesday, suggest Spring’s strategy is sound, even if it ultimately means a smaller footprint for the retail chain. At the 125 stores that the company has chosen to focus on, sales fell by only 1.3% compared with the same quarter last year. Analysts said those figures aren’t bad, given the rise in consumer anxiety this spring and the shift toward essentials and low prices.
And overall, Macy’s, which also owns Bloomingdale’s and luxury beauty chain Bluemercury, saw comparable sales fall by 2%, well below the 3.9% decline Wall Street expected.
At the stores that Macy’s calls “the Reimagine 125,” the company has prioritized higher staffing levels, renovations to enhance product presentation, and the quick introduction of new merchandise. That’s all part of the company’s three-year turnaround program, launched last year and named “Bold New Chapter.” For now, the performance of the Reimagine 125 is crucial to proving to Wall Street that Macy’s can become a more dynamic retailer again.
“These stores need to show positive progress to justify the Macy’s Bold New Chapter strategy,” Neil Saunders, managing director at analytics firm GlobalData, wrote in a research note.
A long way to goand a tariff threat
Macy’s has done a good job so far to stop the bleeding, but the store still faces major challenges as it struggles to connect with consumers.
Despite positive signs coming out of the Reimagine 125, many other stores in the Macy’s fleet are lagging. Once the company is done with its current store-closing campaign, it will have 350 Macy’s stores, a bit more than half the number a decade ago. And while Macy’s primarily sells discretionary items, it can only blame consumer sentiment so much. Overall sales for the company fell 5.1% to $4.6 billion.
Meanwhile, rivals like Dillard’s and the newly private Nordstrom have bested the company. And stellar results from clothier Abercrombie & Fitch and Dick’s Sporting Goods on Wednesday showed how well-run retailers with neatly appointed stores offering what shoppers want can thrive in this environment.
And although Macy’s kept its sales forecast for the year, it did lower its full-year profit guidance, citing higher tariffs, more discounting by competitors, and “some moderation” in discretionary spending. That suggests the company will absorb a good chunk of any price increases caused by tariffs. But Spring told CNBC there would inevitably be some price hikes. About 20% of what Macy’s sells originates in China. “It’s not a one-size-fits-all kind of approach, he told CNBC. “There are going to be items that are the same price as they were a year ago. There is going to be, selectively, items that may be more expensive, and there are items that we might not carry because the pricing doesn’t merit the quality or the perceived value by the consumer.”