Department stores will endure says Macys exec

Department stores like Myer and David Jones are not going anywhere despite the disruptive forces battering them on all sides, according to a leading executive at Macy’s, one of America’s most iconic retailers.
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Executive chairman Terry Lundgren, who was chief executive from 2003 to early last year, said department stores still offered a compelling basic proposition to shoppers and could thrive again by adapting to the tectonic shifts in the industry.

“If you want only Nike footwear, you can go to the Nike store,” Mr Lundgren told Fairfax Media on the sidelines of the National Retailers Federation annual expo in New York.

“But if you want athletic apparel and you want to choose among your options, you go to Macy’s or Bloomingdale’s.”

While Macy’s reported record-high results three years ago, the rise of online stores, the incursion of off-price and fast-fashion retailers, and new consumer habits has seen it mirror the decline in fortunes seen at ‘s department stores.

Comparable sales were down 3.5 per cent in 2016, and profit plunged 38 per cent. That trend continued 2017, with comparable third-quarter sales – the most recent available -down 4 per cent while its shares have fallen about 23 per cent over the past two years.

But the company points to a 1 per cent bump to its latest holiday sales figures and improved profit margins in the most recent quarter as proof its fight back plan is working.Shrinking to grow

Mr Lundgren said the start of Macy’s turnaround was to shrink its physical footprint, cutting store numbers across its Macy’s, Bloomingdales and Bluemercury brands from 985 outlets to 861 since 2015.

From there it could reinvigorate its customers’ shopping experience, both in store and online, while using its still extensive physical presence to enable one of Macy’s most important avenues of growth – click and collect.

Customers bought additional items worth about 25 per cent of the cost of their online order when they collected it in store, Mr Lundgren said, and the easier they made collection the more time they spent shopping for other items.

Macy’s has been competing with Amazon since the e-commerce giant’s inception, and Mr Lundgren said it would be ferocious in its pursuit of n customer.

“What I would advise to competitors is to find products that are unique to you, and make sure you offer an experience that’s unique and different than what the online experience would be,” he said.

“That’s where all of us need to move more aggressively towards.”

While the proliferation of online retailers had hurt Macy’s, Mr Lundgren said the advent of so-called “off-price” retailers like TJ Maxx, which sell often off-season brand label fashion at discount prices, had been just as significant by attracting younger, price-sensitive shoppers.

Macy’s has responded by opening its own discount outlets called Macy’s Backstage inside about 60 stores since 2016, which are delivering double digit sales growth.

Myer has adopted this strategy and opened clearance floors, which insurgent major shareholder Solomon Lew has described as looking like Salvation Army op shops.

Myer is likewise trying to shrink its footprint, closing five stores since 2015 with another four set to close and 19 up for consideration if it can’t negotiate cheaper leases.

Macy’s discount channel also competed with retailers such as H&M, Topshop and Uniqlo, Mr Lundgren said, which was a better option than adopting their own disposable “fast fashion” merchandise.

“We have to be thoughtful to make sure we represent the message of quality with that consumer, and I’m not positive yet that we can,” he said.

The reporter travelled to New York as a guest of Microsoft.