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Air going out of the balloon at Macy’s

By Sarah Berger · Bankrate.com
Wednesday, May 11, 2016
Posted: 6 pm ET
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TREVOR COLLENS/AFP/Getty Images

Business at Macy's has been deflating like the Snoopy balloon after the annual Thanksgiving Day parade. On Wednesday, the department store giant announced sluggish first-quarter sales, signaling that it's still struggling to lure customers in a shopping era dominated by online purchasing and trend-savvy millennials. It was the fifth quarter in a row that sales were down.

The retailer says its sales during the first three months of the year were down 7.4%. Terry Lundgren, Macy's chairman and CEO, cited weakness in consumer spending on clothing as a factor contributing to the weakness.

Multiple sources of trouble

“Headwinds also are coming from a second consecutive year of double-digit spending reductions by international visitors in major tourist markets where Macy's and Bloomingdale's are key destinations, as well as a slowdown in some center core categories," Lundgren said in a news release.

The company outlined strategies for turning around its slumping sales, including rolling out a new jewelry department concept and introducing new and exclusive product launches.

During an earnings conference call, the company offered more evidence that online retailing is revolutionizing the way consumers shop. Macy's said "transactions" (in other words, foot traffic) declined 7%, while digital sales continued to grow. The retailer says it plans to step up its online customer support and increase digital and mobile shopping functionality.

It's not just Macy's

"The retail landscape is changing dramatically with the continuance of online purchasing, and it's affecting all levels of retail," says Michael Londrigan, the dean of Academic Affairs at LIM College -- a school in New York that focuses on the business of fashion.

Will Macy's woes mean more bargains for you? Londrigan, who has followed the retail industry for 30 years, doubts it. "I don’t think they [Macy's] can lower prices anymore," he says. "Just look at the all the promotions they already do. Perhaps there will be more store closures, and maybe some underperforming stores or mall stores will be exited out."

Earlier this year, Macy’s announced it was shuttering 40 of its stores, aiming to cut costs after sluggish sales. Now, after dismal first quarter earnings, things are continuing to look bleak. Department stores in general, not just Macy’s, are having a hard time attracting one key demographic.

Those elusive millennials

"What they are looking to do is attract the millennial customer; that’s the key to success moving forward,” Londrigan says. "I think department stores in general [are struggling], and Macy’s is the largest one… if you look at the typical department store customer they are aging out, and there is nothing below them."

It seems that investors are, in fact, bracing themselves for a disappointing retail earnings season. After Macy's first-quarter earnings report, U.S. stocks plunged Wednesday, led in part by sharp drops for retailing shares.

What do you think? Are you surprised to see Macy's in a slump? 

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20 Comments
MikeBee
May 19, 2016 at 2:30 pm

If all you have to offer is clothing that looks like a truck has run over it a few times, then I can buy that type of thing much cheaper in the barrio, or somewhere else. Why should I pay $95 for a shirt that looks like one I could get from KMART for $20? Macy's stores are a mess, as they keep using the old shopping model that worked 100 years ago with new immigrants from Europe: just throw everything on a table, and people will think it's on clearance, and fight over it. Today's shoppers are not immigrants from Europe. How many men's dress shirts in windowpane does one have to carry? How about carrying some vertical stripes again, or ANYTHING else but windowpane? When Macy's bought Marshall Fields from The May Company and announced that their biggest competitor was Kohl's, I knew that our great Hudson's (Detroit area) had reached steep decline. My wife and I now travel to other areas in order to buy clothing. Sometimes, we buy online, the type of nice stuff that Macy's won't carry.

Karen
May 19, 2016 at 1:35 pm

They need new buyers. The clothes are expensive, too fancy and ugly, plus some of the items have been in the store for years!!!

boss
May 19, 2016 at 10:31 am

It's the Obama economy stupid!!!! Fake econ data and employment numbers can't hide reality!!!!

ellen stacy
May 19, 2016 at 4:39 am

Unkept stores, clothing all for 20 somethings, poor customer service.

HENRY
May 19, 2016 at 3:19 am

where has the style of clothes gone too...polo section is staying mostly the same and higher prices. casual wear don't seems so appealing now, difficult to find bargain, usually the coupons sales they offer is older products less preferred,interest rates has risen on credit cards, lastly but not not least, if you don't purchase nothing in a given time, they lower your credit amount for purchases I hear.

Olin Broome
May 18, 2016 at 11:55 pm

One thing that is wrong is the way that their sales people treat customers to make an extra dollar in their pay check ,I took my friend to Savannah Georgia to buy a dress for something special occasion and we went to Macy's and she purchased an item and she asked to apply for a Macy's credit card and filled out the application and she waited for her credit card that never arrived all that she got was a coupon book that she never wanted and never used and it ruined a perfect credit history and was turned in to the credit bureau as bad credit .It took almost 2 years to get her credit cleared up ,so as far as I am concerned the can go out of business , we will go back to the store but not to make a purchase

Bob
May 18, 2016 at 10:55 pm

It's funny when people try to blame the current resident of the White House for our sluggish economy, when one of the main causes of it is probably right in front of you if you are reading this message: the Internet. Online sales are destroying once-robust retail establishments. And I'm not saying I have a solution. I recently built an electronic project for my car that involved over 200 LED's for a display. Did I get most of them at Radio Shack, where they were $1 each? Or did I get them online, where a pack of 100 was about $5? What do you think? I will pay a 10 or 15% premium to by locally in many cases, but not a 2000% premium.

RFB
May 18, 2016 at 6:28 pm

I have been shopping at Macy's for 65+ years from 34th Street to California to Florida and in between. The quality of their once great clothing has gone so far down that I usually return most of the articles that I order on line. All made in China and all trash but still charging top dollar. Not nice. The interest rate they charge is outrageous. I am a preferred customer with an 820+ credit score and always pay my bill on time. It doesn't matter with Macy's. It is sad to see such a great store known around the world fall to pieces - but it definitely is doing so.

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