Macy's Under Pressure for Fourth Quarter as Sales Slide

Retailer Will Focus on Digital; Roll Out New Campaign This Holiday Season

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Credit: Macy's

It's only May, but Macy's is already in a holiday state of mind as the retailer hopes to reverse sliding sales in the remainder of the year. The 870-unit chain today reported a 7.4% drop, to $5.8 billion, in first-quarter sales compared with the year-earlier period. Same-store sales for the quarter were down 5.6%—the department store's fifth consecutive quarterly decline.

In a release, Chief Executive Terry Lundgren noted that the drops, fueled by reduced spending by tourists in key markets, will give Macy's "the opportunity to make up some ground in the months ahead, particularly in the fourth quarter."

Online spending in the first quarter grew by double-digits, and will be a focus for the retailer moving forward. On a Wednesday conference call, Karen Hoguet, chief financial officer, noted that Macy's will continue to shift some marketing initiatives to digital and social media in the fourth quarter.

"Not everything will work, of course, but we think that our proposition for the customer will be fresh and compelling in 2016 especially as we head into the all-important fourth quarter," she said.

Earlier this month, Macy's said it has tapped new creative agencies Figliulo & Partners and BBH New York for its holiday marketing, following a review dating back to November. For the last eight years, Macy's worked with J. Walter Thompson on a project basis, including on its holiday "Believe" campaign.

Macy's is not alone in betting big on digital. The retail industry is the leader in paid online and mobile media spending, according to new data from market research firm eMarketer. The firm predicts that retail marketers will spend $15.1 billion on paid digital media advertising this year, a 14.9% increase over 2015. Last year, Macy's spent $718.8 million on measured media last year, according to Kantar Media.

The chain, which owns higher-end Bloomingdale's, is also planning to diversify its offerings by rolling out more Backstage off-price outlet locations and expanding its jewelry concept to additional stores. New exclusive offerings with Elton John, Lady Gaga and Shaun White could also entice consumers. Earlier this year, Macy's announced that long-time Chief Marketing Officer Martine Reardon would be leaving the company, effective Friday. A search is underway for her replacement.

Investors were not optimistic. Macy's stock price fell 13.5% to $32 by early afternoon Wednesday. Shares have lost 56% of their value since the retailer's 52-week high in July.

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