Macy’s Inc. reported online sales declined 10% in the second quarter ended July 29, 2023. Net sales declined 8% during the period to $5.13 billion. Brick-and-mortar store sales also declined 8% over the year-ago period.
Despite lagging sales, Macy’s did manage to beat analyst expectations. However, the retailer’s declining sales are signs of deeper problems, according to Neil Saunders, managing director at retail research firm GlobalData.
“Effort, imagination, creativity, and determination are needed to turn Macy’s around. Sadly, these are qualities that Macy’s has traditionally lacked, so it remains debatable as to whether a revival can be engineered,” he wrote in a research note.
Macy’s is No. 17 in the Top 1000, Digital Commerce 360’s ranking of North America’s online retailers by web sales.
Consumer spending declined
Much of the sales slump can be blamed on broader economic trends, says Macy’s CEO Jeff Gennette in a transcript via Seeking Alpha.
“Over the last several quarters, we have seen Macy’s customers more aggressively pull back on spending in our discretionary categories,” he says.
About half of Macy’s customers have annual household incomes of $75,000 or less, and those customers are cutting spending and shifting priorities toward experiences over goods.
There may be a deeper problem, though. Sales are 7.5% lower than they were in Q2 of 2019.
Macy’s sales decline is “significantly worse than the overall market,” Saunders says. “This puts the better performance achieved during the pandemic years into perspective: Macy’s was a beneficiary of circumstance rather than the author of its success. With the advantages of a strong economy now firmly behind us, Macy’s is back to being one of the laggards of retail.”
Macy’s online marketplace
Macy’s digital marketplace, launched in October 2022, is a potential bright spot going forward, the retailer says. The retailer nearly tripled the number of brands available on the marketplace to 1,350, and GMV grew 116% since the previous quarter.
The marketplace is also valuable as a place to test brands and merchandise before potentially offering them in stores, Macy’s says. The department store recently announced Max Magni would join Macy’s as chief customer and digital officer to guide online growth.
The retailer also “soft-launched” an online marketplace for Bloomingdale’s in July. Customers are responding well so far, Macy’s said.
Some of Macy’s brands fared better than others. The flagship Macy’s brand reported the biggest declines, at 9.2%. Bloomingdale’s net sales declined more slowly, down 3.6% year over year. Comparable store sales declined just 2.6%. Bloomingdale’s outlets outperformed standard Bloomingdale’s locations, Macy’s said.
Skin care brand Blue Mercury was the only section of the business where sales grew. Net sales grew 5.6% and comparable sales grew 5.8%.
“Customers continue to respond well to our skin care and color cosmetic brands,” Gennette said.
Macy’s also announced a new private label brand, On 34th, targeting female consumers age 30 to 50. Sales have surpassed expectations so far, Gennette says, with the “potential to become one of our biggest private brands.”
Saunders is cautiously optimistic about On 34th, too.
“This collection is far better than many of Macy’s existing lines and has been assembled with some care and attention to detail. … While On 34th cannot in and of itself pull Macy’s out of the mire, it is an example of the type of initiative that is needed to start moving the dial.”
For the fiscal second quarter ended July 29, Macy’s reported:
- Net sales declined 8% to $5.13 billion.
- Macy’s online sales declined 10%.
- In-store sales declined 8%.
For the six months ended July 29, Macy’s reported:
- Net sales were $10.11 billion, down from $10.95 in the year-ago period.
- Operating income was $368 million, down from $862 million.
Percentage changes may not align exactly with dollar figures due to rounding. Check back for more earnings reports.
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