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Macy's profits collapse as retailer's latest omni-channel plan takes time to take hold

Stuart Lauchlan Profile picture for user slauchlan May 22, 2024
The Bold New Chapter has begun, but is there time to get through it?

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The Bold New Chapter, Macy’s latest turnaround strategy, is taking time to kick in, as the retail icon saw Q1 profit plummet 60% year-on-year to $62 million on revenues down 2.7% to $4.84 billion. But at its First 50 stores, which have been refurbished, there were more encouraging signs, insists CEO Tony Spring.

In fact, inevitably, Spring remains upbeat overall about all the Macy’s Inc brands:

At our largest nameplate, Macy's, the customer is responding well to our omni-channel initiatives across product, presentation and experience. In luxury, we are pleased with Bloomingdale's advanced contemporary growth and acceleration of digital. While at Bluemercury, skin care remains a differentiator and a standout. For both nameplates, we are evaluating new store opportunities that will strengthen our ability to accelerate omni growth. In end-to-end operations, we are actively advancing on solutions to consolidate capacity, increase automation and reduce costs across the network. 

On digital, Spring said:

Digital is also an important part of our Bold New Chapter strategy. It serves as both a gateway to the Macy's brand and is a source of commerce and omni-engagement. Under new leadership, the team is making progress on optimizing the customer journey, including addressing places of greatest friction and enhancing and expanding the shopping experience across platforms. Recently, we launched an online baby registry with over 150 new brands, which has been well received. In addition, Marketplace provides an opportunity to serve our customer better and gain a greater share of their wallet. For example, this year, we're offering a compelling selection of electronics for Father's Day and the graduation season.

Our digital and marketing teams are working together closely to leverage Macy's iconic events and create a modern and cohesive experience. We kicked off the spring season in Herald Square with our 49th Annual Flower Show, where we partnered with Christian Dior perfumes to create floral installations using 16,000 individual plants, representing over 50 varieties. The installation centered around different Dior scents and were supported by interactive components, including an online activation about the origins of Miss Dior. 

First 50

As for the First 50 stores, Spring said these now had Net Promotor Scores that are over 250 basis points above other stores in the fleet. He commented:

We're excited by the early innings of First 50. It's a combination of the things that we have talked about in people, product, presentation and experience. People, it's having the right people in place at the right time. It sounds easy, but using technology and the data we have on traffic and conversion by day, by hour, making sure that we have people in the shoe department, people in the ready wear fitting rooms, people in the big ticket area and fine jewelry. But the team is all over it, and I think doing a great job in leaning into the opportunities to increase the quality of the experience in our stores. That's why we saw a 500 basis point improvement in Net Promoter Scores in the First 50 stores.

He added: 

There was no difference in the level of promotion in those stores versus the rest of the fleet. So no change there. The difference was in traffic, a higher conversion rate and a comparable increase in average unit retail. The customers are responding, as we said, to the right recipe. And I use the analogy of a recipe because a recipe means you have to get all the ingredients right. Sometimes in our business, the merchants want to do their part only if the stores do their part. And the stores only want to do their part if the digital team does their part. In First 50, we're all doing our part, and we're getting credit for product improvement. We're getting credit for visual animation. We're getting credit for the experiences we're adding. We're getting credit for the service experience.

My take

Overall, we continue to view fiscal 2024 as a transition and investment year for Macy's, Inc. Although early stages, we are proud of the progress we are making on our Bold New Chapter strategy. 

Slow, but steady is the message that we’re likely to hear all year from Macy’s as it tries once again to get its omni-channel house in order. If Wall Street gives it the long lead it needs to achieve this, then so much the better.  But while activist investors appear to have been held at bay for now, they’re still a looming presence and will want to see stronger signs of the Bold New Chapter coming to pass. I’m still unconvinced that the plan is actually bold enough, but…

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