Macy's Taps $1B CapEx to Fulfill Customer Demand

For years Macy's has been a pacesetter in the retail industry, and truth be told, there are no signs of the retail chain slowing down. Behind the scenes, the retailer is managing expenses prudently, so that it can invest in its core strategies. With this, Macy's has taken a more holistic view of inventory to effectively and efficiently fulfill customer demand from all directions.
"We are applying our $1 billion-plus annual CapEx budget to projects that will continue to build our infrastructure for growth," said Macy's CFO Karen Hoguet. "We have made a lot of progress."
The outlook for the retailer's fall season reflects its confident optimism strengthened with the reality that many customers still are feeling the impact of an economic environment that at best is improving very gradually. Both Macy's and Bloomingdales are doing what it takes to win with the customer, including delivering newness in merchandise assortment, creating excitement with terrific marketing, deploying new dimensions in technology, and helping customers find great value. These elements, and many others, are wrapped up in Macy's MOM strategies, My Macy's, omnichannel and Magic Selling.
"We have learned that our success is greatest when we do things big and when we emphasize great brands to draw customers to Macy's and Bloomingdales," continued Hoguet. "Examples include, making Macy's America's destination for handbags. The development of our powerful active strategy and all we are doing our business with Millennial customers."
For the second quarter, both Bloomingdales and Macy's had a strong performance, and the Internet-generated demand continues to grow rapidly. The strong performance is expected to continue, particularly now that the retailers have rolled out Buy Online, Pickup in Store – which some people refer to as click and collect – to all the Macy's and Bloomingdales stores.
This capability hasn't even been marketed yet, and the retailer is already finding that many customers prefer this option. Once in the store, these customers are often buying additional items as well. While it's premature to provide color on how the service is being used by customers or how big it could become, as the fall season matures the retailer will have a strong understanding on not only how it's being used, but also its potential.
"We are excited though by what we have seen so far and expect it to be a help in the holiday selling season," noted Hoguet. "Omnichannel strategies are clearly enabling us to accelerate growth and we are just at the early stages of exploring all the opportunities."
The $1 billion CapEx funding is really focused more on technology and building the omnichannel strategies, delivery, expense, as well as things like Buy Online Pickup in Store – all of the new initiatives that Macy's is working toward to help the customer find new ways of shopping and engaging with the retailer.
The retailer remains confident that investing in the Millennial customer is important moving forward and that is largely why the retailer also feels so confident about the future of Macy's. The same is also true for Bloomingdales in its own way.
"We will continue to invest and there are different parts of the investment," said Hoguet. "The first would be how to make our strategies between dotcom, stores and the systems work well together. That's one piece of investment. You've got the warehouses that we have been investing in and we've just started building a new one in Tulsa, so those will continue."
In terms of store technology, the retailer is testing like crazy and will continue to test and rollout different items that work. It's safe to assume that omnichannel and technology investments are going to be an ongoing part of both the retailer's capital budget and also its expense.
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