In a dramatic reversal of fortune, the iconic American department store chain Macy's has announced its third consecutive quarter of beating sales forecasts and now anticipates returning to profitability this year. This marks a significant shift for a retailer many had consigned to the history books after nearly two decades of declining sales and repeated net losses.
The Strategy Behind the Surprising Revival
The path to recovery has been paved with difficult decisions, including a swift programme of store closures. The chain plans to shutter 150 locations between 2024 and 2026, with 66 closing this year alone. This comes during an unforgiving period for retailers, particularly those with upscale leanings, as inflation deters middle-income shoppers, tariffs squeeze profits, and overall consumer sentiment weakens.
However, according to independent experts cited by the Daily Mail, Macy's has discovered a potent formula for its comeback: immaculate stores and consistent, determined leadership. Neil Saunders, Managing Director at GlobalData, observed that the 'sloppy and slapdash execution' once synonymous with the chain has largely vanished. 'The biggest change, however, is not really on the shop floor. It is in management attitude,' Saunders noted.
Spring's Clean Sweep: From 'First 50' to Nationwide Overhaul
Since Tony Spring took over as Chief Executive in February 2024, Macy's has aggressively revitalised the very aspect many legacy retailers neglect: the physical in-store experience. The company's strategy began with 50 pilot locations, dubbed the 'First 50'. The initiative involved adding more staff, refining product assortments, and decluttering the once-standard jumble of merchandise.
The results were immediate and compelling. Sales in these refurbished stores received a massive boost. Encouraged by this success, Macy's has now expanded the upgrade programme to 125 stores—representing over a third of the 350 locations it intends to operate long-term.
'I like the way we're showing up,' Spring told CNBC. 'We look crisp. We look clean. We look interesting, compelling, inspiring, easy to shop.' Retail strategist Carol Spieckerman confirmed the transformation, stating, 'I recently visited a couple of Macy's stores, and they were tidy. The tight racks and stacks of clothes that previously suffocated stores are gone.'
Solid Numbers and a Glimmer of Light
The operational 'nips and tucks' are directly benefiting the bottom line. For the latest quarter, Macy's raked in $4.7 billion in revenue, surpassing analyst expectations of $4.6 billion. Sales at the upgraded stores have risen by nearly 3 percent on average, while sales at other locations, including those slated for closure, still increased by around 1.4 percent. Overall, total sales edged up 0.6 percent despite the ongoing closures.
The company's other brands also performed well: Bloomingdale's saw a 9 percent sales jump, and Blue Mercury rose by 1.1 percent. Neil Saunders characterised these results as 'extremely solid' for the department store sector, representing 'a very big chink of light at the end of what has been a very dark tunnel of decline.'
That tunnel has witnessed the fall of many rivals. Since 2018, iconic names like Sears, JCPenney, and Neiman Marcus have all filed for Chapter 11 bankruptcy. Saunders admitted that before Spring's tenure, Macy's itself risked becoming a 'fading icon of retail.'
Challenges remain; profits were impacted this quarter by weaker credit card income, and the homewares division is still under development. Nevertheless, the boost from competent leadership and strategic investment in the store environment has given the 166-year-old retailer a credible chance to shine once more. 'All this underlines that Macy's is headed in the right direction,' Saunders concluded.
