Macy's Morphing Into Discount Retailer

Macy's said it will plans to expand its off-price arm Macy's Backstage by another 100 stores in 2018, in addition to its 45 store expansion in 2017, as shoppers increasingly turn to discount retailers.

"We saw a lift in performance of almost seven full points per store, and we believe there is more upside," said CEO Jeff Gennette who added the role of chairman to his title this month. "We feel good about the model that we've landed on for Backstage."

The Backstage expansion will include some locations at premium malls. According to a statement, in fiscal 2017, the company opened 30 Backstage off-price stores within existing Macy’s stores. Additionally, Gennette noted Macy's is starting to test Backstage in a smaller square footage, cut in half from 20,000 to 10,000 square feet.

Gennette also said Macy's is "making sure that we have the tech spend to make sure that our store systems and our supply chain systems are ready."

Macy’s began its off-price business in 2015 with the opening of four Macy’s Backstage pilot stores in in the metro New York City area, placing the retailer in competition with other outlet retailers, such as Nordstrom Rack and TJX Companies. Backstage stores offer bargain-hunting shoppers goods at discounts of between 20-80% off.

In 2018, Macy's will also undergo a 50 store rollout of "what best worked for us" from everything it tested last year in its Woodbridge, NJ, store.

"This includes revenue-generating actions such as proven merchandising strategies, the expansion of Backstage and Big Ticket, more fashion and localized product and a focus on leased business, like food and beverage," said Gennette.

"We're expanding in-store technology," he continued. "We're also ramping up local marketing and community engagement. We plan to come out of 2018 with these 50 stores on an accelerated growth track and with the model to scale more broadly across our stores' portfolio in 2019."

Additionally, the department store retailer said it will rollout Mobile Checkout "across most of our doors," in 2018.