• Macy’s Changes Two Stores to Fulfillment Centers

    Macy’s Changes Two Stores to Fulfillment Centers as Online Sales Jump

    Mall Staple Attributes Quarterly Loss to Reduced Foot Traffic at Major Downtown Flagships

    Macy?s reported a third-quarter sales decline of 23% compared to a year earlier. (Getty Images)
    Macy’s reported a third-quarter sales decline of 23% compared to a year earlier. (Getty Images)

    Macy’s, one of the most ubiquitous anchors in U.S. shopping centers and malls, posted a third straight quarterly loss as the pandemic keeps shoppers out of its downtown flagship department stores. As part of a strategy to rethink closed big-box stores, the company turned two into fulfillment centers.

    The parent of 804 legacy store brands Macy’s and Bloomingdale’s as well as Bluemercury, reported double-digit drops in sales and revenues as traffic into stores slumped and it adjusted to a rush of online sales.

    “COVID is surging again across the country and that continues to impede our recovery,” CEO Jeff Gennette said in a conference call with analysts, referring to an improvement plan the company put in place earlier this year to stem sales losses.

    To meet a rapid rise in online sales, he said Macy’s is using two stores that were closed earlier this year as fulfillment centers, a move many retailers are taking to handle the demand. He’s considering expanding that.

    “We’re looking at some of our real estate to test into that, particularly with the demand and the spike that we get with the holiday customers,” he said. “We are looking at all our real estate with that too.”

    Net sales tumbled 23% to $3.99 billion from $5.17 billion a year ago, some of which could be attributed to fewer stores open as the company moves forward on its plans to close 125 stores this year. Same-store sales, a key industry metric of stores open and digital platforms operating longer than a year, also dove some 20% for the period ending Oct. 31.

    E-commerce sales were a bright spot, jumping 27% in the quarter, to help offset the in-store activity collapse. That leap in online sales mirrors the big gains other retailers across the country are experiencing as the COVID-19 outbreak has prompted consumers to shop more often from the comfort of their couch than parading into stores.

    Curbside pickup and buy online, pick up in store, or BOPIS, accounted for 25% of e-commerce orders, the company said. Macy’s intends to push those options because they are considerably cheaper than home delivery.

    Like other retailers, Macy’s, Bloomingdale’s and Bluemercury are finding that shoppers in stores are “not browsing, they’re on a mission,” Gennette said on the call. “They know what they want … and they’re in stores for a shorter period of time.”

    Flagship stores in urban cores such as Herald Square in New York, Union Square in San Francisco and State Street in Chicago suffered the biggest hit to sales as much commerce in those areas has dried up because of fewer office workers, transient consumers and tourists, Gennette said.

    “The stores performing the worst are the ones in downtown locations,” he said. Suburban stores and particularly Macy’s neighborhood stores that are smaller and mostly in off-mall and more convenient locations are the drivers of in-store traffic and sales.

    Suburban stores sales are “pretty consistent,” Gennette said. “You saw those highs and lows, but right now it’s pretty consistent.”

    In another sign of how consumers are shopping and buying, purchases have shifted to casual apparel and home goods, a blow for Macy’s and Bloomingdale’s that have long had robust sales in workwear and dressy fashions. Double-digit sales gains came from home furnishings, jewelry and fragrance.

    Those sales results and shopping modes might lend insight into what to expect for the crucial holiday selling period, considering Macy’s — again, like other retailers — began heavily marketing Black Friday deals in early October.

    Gennette conceded on the call the “elongated holiday demand” probably pulled some November and December sales forward. He also noted that closing stores on Thanksgiving Day for the first time since 2013 and coronavirus fears are likely to “bring down the traffic in brick-and-mortar stores.” Another factor, too, could come from new capacity restrictions many states and cities are putting on retailers as COVID-19 cases multiply.

    “We know this year is different,” Gennette said.