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Macy's trying new store format in Texas

Cortney Moore

Macy's is reportedly opening a new boutique concept this week, the first of several across the country.

The Market by Macy's store is in Southlake, Texas, and will carry an assortment of cosmetics for skin and hair, plus men and women's clothing and accessories, according to the Dallas Morning News. Women's Wear Daily reports that the store will also have a café.

This new venture will reportedly be led by retail innovator and STORY founder, Rachel Shechtman, who launched the narrative-driven marketing in 2011. Seven years later, Macy's acquired STORY and has implemented its business tactics across several stores, such as pop-up marketplaces.

"[Retail] is not just about selling things, it's about experience. Experience sells things, not the place. If you're not actively trying to open their pocketbook and you give them an experience, you will have mind-blowing results," Shechtman told Forbes when the partnership was first inked.

Macy's did not respond to a FOX Business request for comment. Other locations opening this year are Forth Worth, Texas, Atlanta and Washington, D.C.

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There is no denying that Macy's is trying something new. Its online career page lists job roles as a "New Retail Concept at Macy's," which some could interpret as a way to conceal the name of a recently developed brand.

So far, there are openings for sales associates, café team members and kitchen supervisors at the Southlake location. However, there is no start date listed for the positions.

The opening of a new stand-alone store comes at a time when Macy's and other department stores are struggling to grow sales. The rise of eCommerce and direct-to-consumer brands have severely threatened the traditional brick and mortar model, which has forced large retailers to readdress how they do business. Earlier this month, Macy's announced it would close down 30 stores throughout the year as it has continually downsized its real estate.

Macy's is expected to discuss this new venture during an investor call Wednesday morning.

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This isn't the first time Macy's has prioritized the beauty category to bolster sales. In 2015, Macy's bought luxury beauty chain Bluemercury for $210 million. Macy's does not report Bluemercury revenue and growth separately, however, a report from Seeking Alpha suggests that the beauty vertical could be worth $6 billion today.

The global beauty market is projected to reach $716.3 billion, according to data compiled the online statistics portal Statista.

Despite its surging growth, boosting sales within this category could be a difficult feat for Macy's due to market, a growing fast beauty industry and shifting demand. Large specialty retailers such as Sephora and Ulta have carved out a consumer base with its loyalty programs and abundant locations.

However, it is also important to note that even some of these established beauty giants have encountered growth struggles. Sally Beauty Supply has closed down stores in the last few years. Likewise, elf Cosmetics closed down all its physical stores last year to focus on its online sales.

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In August, Ulta Beauty's stock took a tumble after CEO Mary Dillion revealed that slowing makeup trends contributed to the retail chain’s declining makeup sales across its 1,120-plus U.S. stores.

Sephora, on the other hand, appears to perform well with its luxury offerings. Though, the business has adopted mass beauty brands alongside its prestige beauty lineup – which may be its way to diversify inventory enough to attract budget-conscious shoppers.

LVMH does not report Sephora's earnings outright, but it has grown to approximately 2,300 retail stores with 30,000 employees across 33 countries.

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Macy's has had longtime success with apparel sales, so it is unclear how its new beauty business will perform in the market given the industry's many challenges.

In its last quarter, Macy's reported its first same-store sales decline in two years. Holiday sales were also down 0.6 percent.

On Friday morning, Macy's shares were down less than one percent. Its stock has fallen a little more than 34 percent in the last year. The department store's market cap is at about $5.2 billion.

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