Macy's Continues Tech Investment Despite Slumping Sales

Macy's, Inc. acknowledges consumers aren’t going to buy more, as the company searches for a way to engage them as consumers transform the way they shop.

Sales in Macy's first quarter 2016 dropped 7.4% below last year. On a two-year basis, comp sales were down 2.9% per year.

“We are seeing continued weakness in consumer spending levels for apparel and related categories," said Terry J. Lundgren, Macy’s, Inc. chairman and CEO. 

"We are not counting on consumers to spend more this year, but we are working hard to give them reasons to shop more with us," commented CFO Karen M. Hoguet.

Digital sales for the department store retailer continued strong, still growing double digits, but grew less rapidly than anticipated. Macy's is "absolutely not pulling back our commitment to digital and omnichannel retailing," commented Hoguet. Mobile remains a high priority for Macy's as it continues to invest in this technology.

"While we have already somewhat downsized our fleet of stores, we continue to see value and opportunity in physical locations that sync with desktops, websites, apps and mobile in giving customers choices and meeting demand in new and different ways," she said.

Another area of success for Macy's has been the rollout of Last Act, its centralized clearance areas for women's and men's apparel within the Macy's stores, and Backstage, its off-price concept, which the retailer said it expects to open approximately nine more of this year.

"We're frankly scratching our heads," said Hoguet as she explained Macy's is seeing the same economic data as everyone, which would point to a customer that would be spending more.

"I'm not sure, but I would say that we too are somewhat puzzled by the data that we're seeing on the consumer and the traffic we're seeing in the stores and on the site."

The company outlined three areas of action designed to improve the 2016 business trend:

1. Speed up/scale up what’s working –Continued rollout of in-store pilots of Macy’s Backstage (six stores-in-stores already open; nine additional by the fourth quarter) and Bluemercury (five in-store shops already open; a total of 22 expected to be in place by the fourth quarter). Macy’s also is rolling out its upgraded jewelry department concept, successfully piloted in 40 stores in fall 2015, to more than 350 stores by year-end 2016.

2. Excite customers with greater newness and more exclusive merchandise – An array of exclusive product launches will be coming in the months ahead, including new wearable technology from Samsung and other resources. According to Hoguet Macy's will move towards becoming more aggressive in what customers want in the wearable tech side.

3. Intensify expense reduction efforts while investing in key areas of customer service – Macy's is investing in front-line service (such as more full-time store associates and enhanced online customer support), and technology (including increased digital and mobile shopping functionality) at Macy’s and Bloomingdale’s.