As Consumers Cut Back on Discretionary Spending, Macy’s Amplifies Leaner and Personalized Inventory

Consumers are cautious these days about their spending.

It’s the tale of the retail community and the real-life challenge Macy’s is currently grappling with. On Tuesday (Aug. 22), in its second-quarter earnings report, Macy’s said consumers are expected to adopt a more discriminating and financially mindful attitude as the year winds down.

Consequently, Macy’s is streamlining its physical store spaces and online platform, aiming to reduce clutter and improve navigability. The content remains consistently updated and aligned with the current season.

“We continue to see uncertainty in the macroeconomic environment. We are leveraging our robust data science tools to refine inventory composition while reading and reacting to shifting consumer preferences to meet demand,” said CEO Jeff Gennette. “Looking ahead, we are committed to fortifying our core business and improving our customer experience while investing in our five growth vectors. We believe these advancements, enabled by our strong talent, will drive our relevancy and long-term success as a modern department store.”

Under the Macy’s brand, the company experienced growth in the beauty segment, particularly in fragrances and high-end cosmetics. Women’s professional sportswear, men’s tailored clothing, and the off-price section with Backstage also performed well. However, there were difficulties in the active, casual, and sleepwear categories.

In May, PYMNTS reported that Macy’s would lean into smaller format stores and leaner inventory to keep its offerings fresh.

Macy’s also looked to expand beyond the traditional mall setting in response to investors’ perception of department stores as outdated and unexciting. The company targeted customers in thriving shopping centers and rapidly growing suburbs while leaving behind declining malls. In these smaller locations, Macy’s showcased a curated selection of popular brands, with displays that were regularly updated to remain current and attractive to customers.

Reportedly, Macy’s has been harnessing technology to guide its inventory decisions for stores featuring adaptable layouts and displays. The retailer has been utilizing heat maps, which visualize customer traffic patterns within the stores. This data is subsequently employed to identify top-selling merchandise and to fine-tune product offerings accordingly.

During a CNBC interview at the time, Gennette noted that 2023 would serve as a pivotal trial for Macy’s new strategy.

Read more: Macy’s Expands to Strip Malls With Smaller Stores and Leaner Inventory

In line with this, Macy’s revealed the upcoming launch of four new small-format stores set to open in the fall. These introductions signify the initial expansion of their small-format stores into the Northeast and Western areas of the United States, featuring openings in Boston, Las Vegas and San Diego.

The decision to broaden its presence in the Northeast and West regions mirrors the trend of increasing small store openings in the Midwest. While the existing eight locations retain the name “Market by Macy’s,” the forthcoming small-format stores will exclusively carry the Macy’s name.

“We’re thrilled by the success of our small-format stores and ongoing geographic expansion with our inaugural move into the Northeast and Western region,” said Macy’s Chief Stores Officer Marc Mastronardi. “As a growth vector for Macy’s, Inc., small-format stores offer a curated shopping experience celebrating discovery and convenience. These stores optimize our physical store footprint and bring us closer to existing and desired customers while encouraging more frequent visits.”

In July, PYMNTS also reported on the introduction of Macy’s latest brand, “On 34th,” designed to tackle the drawbacks of the one-size-fits-all approach to women’s clothing. The initiative seeks to offer consumers garments that genuinely suit them and strives to enhance loyalty and minimize return instances.

Read more: Macy’s, Nike Launch Inclusive Fits for Decreased Returns

Macy’s by the Numbers

In the second quarter, Macy’s saw a $5 billion net sales, an 8% decrease from 2022.

Both brick-and-mortar and digital sales dropped by 8% and 10%, respectively, compared to the same period last year. Comparable sales for the company were down 8.2% on an owned basis and 7.3% on an owned-plus-licensed basis.

Macy’s brand experienced a 9.2% drop in owned basis comparable sales. The Star Rewards program contributed to approximately 72% of Macy’s brand comparable owned-plus-licensed sales, up 3 percentage points from the previous year.

Bloomingdale’s comparable sales fell 2.7% on an owned basis and 2.6% on an owned-plus-licensed basis. Bluemercury’s similar sales increased by 5.8% on an owned basis.