DISCUSSION
Is Macy's in trouble?
Written by George Anderson
Macy's, similar to many other department stores, had a tough fourth quarter last year. The chain blamed the unusually warm weather across much of the U.S. for its problems. But, as reports point out, Macy's performance problems aren't just about a single quarter.
According to Fortune, Macy's same-store sales have been on the decline for four years. While business was positive for most of that time, overall revenues fell in 2015, the first decline going back to the Great Recession.
The one constant at Macy's has been the leadership of Terry Lundgren. The retailer's CEO took a hit in the wallet when he failed to receive a bonus for 2015 or a raise for 2016 because the company failed to meet financial goals.
In addition to its warm weather woes, Macy's continues to lose business to discounters such as T.J. Maxx as Millennials seem quite willing to wear fashions from previous years that come at a fraction of the cost of the goods sold in department stores. Macy's opened its own off-price concept last September beginning with three Macy's Backstage locations in the New York metro area.
Forbes contributor Walter Loeb believes that Mr. Lundgren and Macy's have made a mistake with Backstage. He writes that the new business will prove to "be a pimple on the sales chart and a minor contributor to earnings." Instead of pursuing sales of unsold clothing and bringing in new budget-price apparel, Mr. Loeb thinks Macy's would be better served by converting basements in some locations into tech departments that appeal to younger, affluent consumers. He also suggests improved foodservice options such as "a high-class delicatessen" to both attract shoppers to Macy's and keeping them in stores.
It should be noted that Macy's has converted the basement of its Herald Square flagship store into One Below, a destination for younger consumers, specifically those in the 13 to 22-year-old age group. The department, which uses house music as an atmospheric sound track, offers wearable tech and accessories; a machine the custom embroiders Levi's jean; a 3-D printer that makes jewelry and smartphone cases; and a "selfie wall," which projects pictures of New York landmarks for photo backdrops.
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