Macy’s is tackling the mounting pressures of department store retailing head on by embarking on an ambitious transformation.

Iconic US department store operator Macy’s saw profit fall 29.9% to $1.1bn (£791m) in 2015.

After what has been a troubling year for the department store sector, Macy’s posted sales of $27.1bn (£19.5bn) for the year ended 30 January, a 3.7% decline from the previous year.

Chief executive Terry Lundgren remained bullish as to Macy’s prospects for 2016. “After the previous six consecutive years of cumulative success, 2015 reminded us that retailing is a dynamic business that requires continuous reinvention as the customer evolves,” he stated.

“We are examining every aspect of our business so we can grow profitable sales.”

Widening appeal

Macy’s rolled out a series of strategies in 2015 intended to broaden the company’s appeal and shopper base.

Its off-price fascia Backstage opened its first outlets last year, while Macy’s sought to diversify through the acquisition of beauty specialist Bluemercury.

The retailer remains confident that these investments will see a long-term return.

In 2016, Macy’s plans to open 42 new Bluemercury sites – 18 within existing Macy’s outlets and 24 standalone stores. Backstage is to be added to 15 Macy’s stores, with one standalone location planned.

Macy’s is also exploring further real estate deals to capitalise on its extensive portfolio, mostly centred on finding ways to monetise under-exploited property.

Challenging future

These results come hard on the heels of an announcement last month that 40 stores across the US would close, shedding about 3% of the Macy’s workforce.

Its 2015 figures included $288m (£207.3m) in charges related to these moves. As part of the 2016 outlook, Macy’s foresees sales dipping 2% and comparatives to slip 1%.

“While no one can fault Macy’s for its determination to affect a transformation, the department store as a format seems increasingly anachronistic in a digital retail age”

Howard Lake

While no one can fault Macy’s for its determination to affect a transformation, the department store as a format seems increasingly anachronistic in a digital retail age. The feeling remains that shoppers increasingly view such outlets as a relic of another age.

To its credit, Macy’s has shown a willingness to confront this issue head on, with its online offer among one of the sharpest to be found in US retail.

Yet a bricks-and-mortar business of Macy’s size cannot transition to digital overnight, and ways to enhance the store’s relevance to shoppers will continue to be sought.

As with peers like Nordstrom and Kohl’s, off-price apparel is viewed as potentially viable segment. But if they’re all doing it, can all of them succeed?

Bluemercury is perhaps a smarter move, offering as it does an opportunity to tap new, younger shoppers. It will be interesting to see where Macy’s stands this time next year.

  •  Howard Lake, editor, Planet Retail