By Brian McKay
Macy’s (symbol M) has been in the news lately, more than normal. The nation’s biggest retailer is making changes that reflect how dramatically different the consumer has become since the recession. As has been mentioned on zenruption previously, good enough and discount shopping have become the new cool theme. Disposable, fast fashion is now hot and Ben Sherman shirts were recently on sale for $12 at Costco (this author bought three). Why bother with Macy’s?
Well it seems that Macy’s figured out that the only thing that attracted buyers was a sale. Ever since 2008, two day sales have been popping up for absolutely no reason just about every two days. Why pay full price when you get a sale price nearly every week? To say it has hurt business and profits is an understatement. The fact that the stock has declined from $72.80 last July to $42.85 on February 24, 2016, represents this.
It comes as no surprise that Macy’s announced the intent to close 40 stores in the first part of January. It was a surprise that their earnings beat expectations on Wednesday’s earnings call and spiked. The problem is that their year over year sales were down 5.5% and the higher than expected profit was the result of cost cutting by management. Those are not exactly happy, feely things.
The biggest shocker was the announcement that Macy’s will be opening the Backstage brand off price stores within some existing stores. Huh? Isn’t there already such a thing called a clearance rack? Why a company would cannibalize its own sales with a special low cost store inside of itself, is baffling. Keep the discount stores across the damn street Macy’s.
The Backstage move represents Macy’s attempt to woo the new consumer much like TJ Maxx and Marshall’s have been doing successfully for years now. The TJX Companies (symbol TJX) have seen their stock moving up for some time. Macy's is not the TJX Companies.
Yes, the consumer has changed for good. Full price just isn’t cool. Conspicuous spending is now seen in a very bad light. No one wants to see your stupid price tag unless they are fellow Rick Kids of Instagram.
Macy’s won’t be able to capitalize on this on this trend. Their inventory model is still old school retail and the Backstage stores in their Macy’s stores is just a horrific idea.
Several analysts have upgraded the stock recently. zenruption disagrees. It might be good for a little while, but in the long run Macy’s is a real stinker.
What do you think? Comment below
Photo courtesy of Flickr, under under license of Creative Commons Attribution-Noncommercial license
Brian McKay is a co-founder of zenruption and has his MBA from Boise State University. He has become a total discount shopper and thinks Kirkland brand shirts at Costco rule. Every now and then he will take his daughter and her friends to mall and hide in the pizza joint that has 50 beers on tap.