As Sales Dip, Macy's Focuses on Plenti and Backstage

5/20/2015
Macy's recorded first-quarter sales of $6.2 billion, down 0.7 percent year over year as a drop in international tourist traffic amid a strong dollar drove slower-than-expected sales also affected by a West Coast port delays and a stormy winter on the East Coast. Tourists drives 5 percent of the retailer's annual sales, and sales from this demographic were down double digits in the quarter.

However, the retailer's adoption of the loyalty program Plenti, which is merging with the current Star rewards initiative, is resonating well with customers. Described as the "first loyalty coalition involving major U.S. brands," Plenti in its first week enrolled more than 2 million users. Macy's hopes the program will not only encourage current customers to buy more but also attract new shoppers who may come to the retailer through Plenti from other brands.

CFO Karen Hoguet expects Macy's will begin to see Plenti's impact on the bottom line around spring of 2016. "It will take customers time to start building points and really understanding the strength of the program," she said.

For its offprice concept, Macy's Backstage, the retailer revealed it likely will include some brands and vendors not carried in full-line stores, while some full-line labels almost certainly won't show up in outlet locations. According to Hoguet, Backstage presents an opportunity to right-size inventories in Macy's best-performing full-line stores. Clearance items, she explained, are likely taking up too much floor space in the 30 "platinum" Macy's stores that rely on fresh product instead of markdowns. "That may be where we take more of the clearance out than other stores that we think are more dependent on that traffic," she said, noting that the company will take different amounts of clearance products out of different stores. Product will not be shifted to Backstage until well into the markdown cycle.

Earlier this year Macy's launched a major collaboration with Mexican icon Thalia Sodi including a full line of apparel and accessories designed for the Latina shopper. The multi-brand category is performing well with customers beyond the Latina demographic, Hoguet noted.

And Macy's believes its All Things Wedding initiative, which touches every category across the store, may be integral to building "ongoing loyalty" with Millennial shoppers.



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