(Bloomberg Opinion)—Macy’s Inc. started 2018 with a roar and ended it with a whimper. The mall stalwart reported on Tuesday that comparable sales rose 0.4 percent in the fourth quarter, or 0.7 percent including licensed departments, from a year earlier. That was lower than analysts’ estimates, which had already been tempered by the company’s disappointing holiday results.
The outlook for 2019 isn’t particularly confidence-inspiring, with Macy’s expecting revenue growth to be flat and comparable sales growth to be between 0 percent and 1 percent. Great, so it won’t backslide, but it won’t make big strides forward either. And it will turn to restructuring efforts to help it get there: The retailer outlined a plan to streamline its senior management structure and reduce expenses, a move it says will result in annual savings of $100 million, which it can use to bolster its efforts to attract more shoppers.
I don’t see particular reason to criticize this move. If it makes Macy’s a more nimble and responsive retailer, which is the goal, that’s indisputably a good thing. Plus, given that Macy’s expects slimmer gains on real estate sales in fiscal 2019 than it notched in the previous two years, it is sensible to look for other ways to find cash to invest back in the business.
That said, I don’t think of bloated costs as being Macy’s essential problem. The department-store chain already has trimmed a lot of fat; it launched a cost-cutting initiative two years ago that generated $550 million in annual expense savings and slashed thousands of jobs.
What Macy’s really needs is a more urgent plan for having more exciting merchandise. It has doubled the number of items it sells online in the last year, and that has helped noticeably. But every time I see a sharp, new private-label clothing line from Target Corp., or when I see Nordstrom Inc. forging wholesale relationships with the likes of Anthropologie, J. Crew and Boden, I keep wondering: Where is Macy’s version of that story?
Macy’s just named a new chief merchant, Patti Ongman, which I suppose could end up being a turning point. Yet Ongman is basically a Macy’s lifer, with 33 years spent at the company, so I suspect her ascension to this post won’t result in drastic change.
Macy’s also needs to move faster on transforming its stores into more contemporary shopping destinations. I’m encouraged to see its guidance reaffirming that it will roll out its “Growth 50” redesigns to 100 more stores this year. But Macy’s would also benefit from moving faster on rolling out its Market @ Macy’s concept and adding Bluemercury shop-in-shops to more locations.
And I want to hear more from the department store about how it’s going to cast a wider net in its hunt for customers. Macy’s has made commendable progress in deepening its relationships with those who are already devotees. The company says that spending by the top tier of customers in its rewards program rose 10 percent in 2018. Backstage, the off-price section within some of its stores, appears to be satisfying these Macy’s loyalists and encouraging them to shell out more.
Yet I worry Macy’s isn’t doing enough to hook the shoppers who aren’t already in its tent. Case in point: On a call with investors Tuesday, Macy's executives said some of the reason for disappointing holiday sales was that they had limited a major promotional event to members of its rewards program. The result, they said, was they "missed an opportunity" to score with the infrequent or new customers that the holiday season tends to send their way.
Plus, if you haven’t walked in a Macy’s in the past five years, what has it done recently that would encourage you to give it a try?
Macy’s is undoubtedly in a better place today than it was a little more than a year ago. For the full year, comparable sales rose 1.7 percent, snapping a three-year streak of declines on this key measure. But Macy’s still has much to prove before I’m convinced its turnaround is durable.
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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