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? Tweet to @sarahberger0408