FINANCE

Commentary: Real chance of a turnaround at Macy’s, but…

After a torrid opening quarter, Macy's second quarter numbers come as a relief. Certainly, a same-store sales decline of 2.8% is far from good, but it is one of the better performances Macy's has turned in over recent periods. Of course, the question is whether this gentler decline represents a genuine turning point for Macy's, or whether it is simply a bottoming out after years of sharp deterioration.

One of the factors that has benefitted comparable sales is the program of store rationalization. As much as this is painful to total sales growth, Macy's has retained some of the sales as loyal shoppers have transferred their custom to other stores. This impact was not present in the first quarter as Macy's was in the midst of closing down stores, but is now coming through more strongly. This is encouraging as it indicates that Macy's rationalization will ultimately deliver higher levels of store productivity without severe damage to volumes.

Positively, the ebbing sales tide has also slowed at a time when some of Macy's long talked about strategic initiatives are finally coming into play. In our view, this suggests that the company may now be getting its act together in improving the quality of the in-store experience. We are hopeful that this energy and drive is a function of the new leadership of Jeff Gennette, although we recognize that it is still far too early in his tenure to pass fair judgment.

The revamped women's shoes offer is an example of an initiative which is helping Macy's regain some momentum. Here, the company has advanced the proposition and moved to an open-sell self-serve model. After a successful pilot, which resulted in double digit sales growth, the strategy is now in more stores and will be rolled out to all shops by the end of August.

Jewelry is another area of progress, albeit one that has been in play for quite some time. The edited assortment, improved training, and higher staffing levels have all helped to provide momentum to the category and have increased sales. As this has been successful, we have previously lamented the fact that Macy's has not rolled out the initiative faster; however, we are pleased that there is now a concerted effort to get it into all stores by the end of summer.

As much as these steps are positive, they are but small drops of success in a vast ocean of challenges. Alone, they will not transform the business, and they do not put Macy's on a growth footing. For that to happen a more radical and fundamental rethink of other categories — including the problem child that is apparel – needs to happen.

On this front, some good thoughts are coming from Jeff Gennette. He has recognized that stores carry too much assortment, that ranges are not adequately curated and coordinated, that inspiration is lacking, and that Macy's is not a place for ideas and the exploration of exciting products. These are all issues we have long since flagged and that we believe need to be remedied if Macy's is to get back on a path to growth.

As might be noted, the list of things to do is long. It cannot be delivered overnight. As such, we see more short-term pressure for Macy's, albeit not on the highly negative scale of the first quarter. There is now a real chance of a turnaround, but it has to be actively worked for.

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REAL ESTATE

Leasing opens at One Hudson Yards

BY Al Urbanski

New York City’s transformation of an old warehouse district into a Jetson-esque neighborhood of the future begins in earnest this week with leasing beginning at the 33-story One Hudson Yards residential tower.

“One Hudson Yards was curated for those who seek an elevated sense of living,” said Benjamin Joseph, Executive VP of Related Companies, developer and leasing agent for the massive project.

Situated alongside the High Line, the tower is “the new epicenter of cutting-edge architecture, culture, shopping, dining and parks,” according to Joseph.

Related is also projecting Hudson Yards as a luxury shopping destination suited that will rival Fifth Avenue. When completed, it will offer more than 100 shops and restaurants, including New York’s first Neiman Marcus and dining concepts from top chefs Thomas Keller and David Chang.


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BUSINESS INTELLIGENCE/ANALYTICS

Study: One in four retailers feel paralyzed by Amazon

BY Deena M. Amato-McCoy

Retailers are eager to combat the force of Amazon, but they lack the strategy, marketing dollars and digital resources to do so.

Specifically, 44% of retailers do not know how to respond to the power of Amazon, according to “A New Path for Retail: Co-Existing with the Force of Amazon.” The report is from Bluecore, a commerce decision platform provider.

According to the study, 60% of retailers consider Amazon at least somewhat of a competitor. These companies also continue to grapple with free shipping, email communications and better access to customer data to mimic what Amazon does best: provide highly personalized and convenient experiences for customers.

Specifically, 63% of retailers believe free shipping for loyalty program members is one of Amazon’s most impactful consumer-facing technology initiatives. Yet, only 10% of retailers have significantly increased investment in technology to better compete with Amazon. Meanwhile, 29% of retailers haven’t even changed their data collection and analysis processes as a result of Amazon’s influence.

“Amazon exceeds at listening to its customers. Coming anywhere close to Amazon’s success in this area will require retailers to capture data on customer behaviors and preferences and analyze that data to fuel more intelligent decision-making and more personalized experiences,” said Jared Blank, senior VP of data analysis and insights at Bluecore. “The intent is fantastic, but many brands are severely limited in their abilities to obtain and digest this level of data. Even with an exceptional data and customer experience team, the risks are just too high.”

While better data and experiences are important, Bluecore’s experts have an achievable solution: accept Amazon as friend, not foe, and use the online giant as a distribution channel.

Some retailers have already embraced this opportunity and are selling products through Amazon — but not a majority. To date, only 30% of the retailers surveyed currently sell their products through Amazon. However, for 9%of those retailers, 50% of their sales come from this channel.

“Brands are at a crossroads. The choice is: compete against a company that spends more than $10 billion annually in R&D or leverage that incredibly powerful distribution channel,” said Blank.

With an increasing number of Amazon Prime customers and more consumers beginning their product searches on Amazon, “it’s simply ridiculous to think you’re going to succeed alone, Blank added.

According to Bluecore, the world’s largest brands are using Amazon as a distribution channel, and their revenue and earnings reports are seeing a sizeable uptick. “It’s not about failing to go it alone, it’s about learning to co-exist with this e-commerce behemoth – and embracing the right strategies for your own digital properties to continue to build brand awareness and loyalty,” he added.

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