Macy’s Upscale Upgrade

As Macy’s is seeing revenue from its department store business slide, it is planning to move its best and most productive stores to upscale. This decision comes as Macy’s is announcing their second quarter in a row of falling sales figures, exacerbated by wicked East Coast weather, logistical issues at West Coast ports and tourist spending declining.  All in all, sales fell 0.7 percent to $6.23 billion for the three months that ended May 2.

This result seems to belie analysts’ predictions that the winter had created pent up demand that retailers would see when spring sprung. While the weather changed, April’s sales figures were just as flat as March’s, and it seems consumer demand is not what some were predicting. More of a concern, retail sales have been flat or down in four of the past five months.

Macy’s is a dominant department store – but it is struggling to grow as shoppers are moving on to different venues and avoiding the malls where department stores like Macy’s generally live. This has motivated the retailer to rethink its customer acquisition plan – with moves like fully developing an outlet business that will move Macy’s from the mall.

Macy’s also announced yesterday (May 13) plans to add higher-end merchandise to a selection of its 150 best-performing stores. The high performers will also see larger stocks of popular items, redesigned departments, additional staff, new technology and enhanced visual presentation.

“We believe there is opportunity to elevate these stores further and accelerate their growth,” Karen Hoguet, Macy’s chief financial officer, told analysts on a conference call. “Hopefully we will begin to see the benefit this fall, particularly in the fourth quarter.”

Sales growth at the locations, external economic factors in their markets, customer service levels at the stores and their profitability were all criteria Macy’s used in selecting its new upscale variations.

“If you think about it, the top malls in the country are doing extraordinarily well, as are we,” Hoguet said. “But we think we can actually push that growth further.”



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