(Bloomberg Opinion) -- Macy’s Inc. is having a miserable year. With meager sales growth and a lackluster annual forecast, it is currently the worst-performing stock in the S&P 500 Index.
It’s not as if the venerable chain isn’t trying. Macy’s has undertaken a wide array of turnaround efforts, including an expansion of its off-price Backstage business and a dramatic increase in its online selection. And there are clearly forces beyond its control, with the so-called retail apocalypse looming over the entire industry.
All that said, there is more that Macy’s could do to improve its prospects. Here are four things the company should do right now.
Strengthen its private-label apparel brands. These make up about 20% of the chain’s sales, and it could benefit from driving that share higher. Macy’s has said it is working on improving its sourcing of these garments. But it ought to go further, launching new brands and scrapping tired ones. When Target Corp. undertook a successful overhaul of its private-label clothing business, there were no sacred cows: In fact, two of its biggest, Merona and Mossimo, were dumped. Without seeing sales and profit figures for each Macy’s brand, it’s hard to know exactly which ones should be on the chopping block. But, to my eye, INC International Concepts looks ripe for a rethink. There are a whopping 633 different women’s tops under this label on Macy’s website as of this writing — an unnecessarily huge assortment that ranges from bohemian soccer mom to “Love Island” contestant. Who exactly is the customer for this? If Macy’s can’t answer that clearly, it should go. With Story, do it right or don’t bother. I was optimistic about this idea as a potential driver of foot traffic, as it is supposed to be an Instagram-friendly, gallery-like display space that brought frequent newness to a store. My latest visit to a Story shop-in-shop, however, soured me on its potential. Some of the décor for the newest back-to-school-themed display appeared to be leftovers from the previous outdoors-themed display. If Macy’s wants this thing to work, it has to invest enough to make each iteration different from the last. Either devote more resources to Story, which started just last spring in a few dozen stores, or scrap it. Speed up store renovations. Macy’s will have renovated 150 stores by the end of 2019, part of a prudent initiative it began in 2018 to give its most productive outposts new fixtures, better in-store technology and more localized merchandise. The company plans to do more of these renovations in 2020 and says these makeovers, which cost about $3 million a pop, could eventually go to as many as 350 stores. I’d recommend Macy’s not let the next 150 remodels take as long as the first 150. The spiffed-up stores are outperforming the rest of the fleet, so it’s a no-brainer to invest quickly in a wider rollout. Refine the vision for the rest of the store portfolio. There are hundreds of Macy’s stores that won’t be getting the splashy upgrades described above. Macy’s is calling these leftovers “neighborhood stores,” and executives plan to reduce them in both size and number of employees. I get why Macy’s doesn’t want to close them, as it finds it difficult to make those sales transfer to e-commerce or a nearby store. But the company will come to regret hanging onto dreary locations in dying shopping centers. Macy’s should consider something closer to Nordstrom Inc.’s strategy with Nordstrom Local, in which it is opening tiny service centers where customers can return or pick up online orders or have an appointment with a stylist. Locations for these Nordstrom outposts are being selected with digital shopping in mind. That may be more effective than Macy’s trying to repurpose real estate built for the shopping landscape of the 1980s or ’90s.
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Sarah Halzack is a Bloomberg Opinion columnist covering the consumer and retail industries. She was previously a national retail reporter for the Washington Post.
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