Macy’s sales nightmare is just beginning


On Wednesday, Macy’s announced that it would shutter more stores and cut jobs.

“In light of our disappointing 2015 sales and earnings performance, we are making adjustments to become more efficient and productive in our operations,” Chief Executive Terry Lundgren said in a statement, via Reuters.

The company said it would close 40 stores.

But this shouldn’t come as a surprise.

In November, Lundgren anticipated that the company would have a tough fourth quarter.

“I wish I could say it’s going to get ice cold across the country, I wish I could say that tourists are going to begin to show up and start spending, but you can see in our forecast for fourth quarter, we’re not expecting that,” Lundgren said on an earnings call at the time.

And as anticipated, the holiday season was rough for the department store chain; comparable sales dipped 5.2% for the November-December holiday period.

“The holiday selling season was challenging, as experienced throughout 2015 by much of the retailing industry. In the November/December period, we were particularly disadvantaged by the historically warm weather in northern climate zones where both Macy’s and Bloomingdale’s are especially well-represented,” Lundgren said in a release. “About 80% of our company’s year-over-year declines in comparable sales can be attributed to shortfalls in cold-weather goods such as coats, sweaters, boots, hats, gloves and scarves. We also continued to feel the impact of lower spending by international tourists as the value of the dollar remained strong.”

But the cold weather has been a problem plaguing more than just Macy’s. This past fall, Gap Inc. CEO Art Peck in part blamed Banana Republic’s recent troubles on unseasonably warm fall during an earnings call.

But colder weather can’t fix everything.

“The wider truth is that Macy’s remains a business that is somewhat out of kilter with what modern consumers want. Ranges, store locations, and its general store environment are simply not optimised to deliver; and in an era when consumer spending remains constrained, Macy’s is increasingly losing out,” Neil Saunders, CEO of consulting firm Conlumino, wrote in a note to clients this past fall.

But regardless of what Macy’s does to mitigate its problems, it faces a bigger, looming threat: American spending patterns.

Consumers are largely choosing to spend their money on technology, rather than apparel. Those who are looking for discounts are choosing to shop at TJ Maxx and Ross Stores outlets instead of traditional department stores. Macy’s has released an off-price offshoot, Backstage, but younger, more trend-savvy shoppers are enthralled with fast fashion brands like Zara, H&M, and Forever 21.

Macy’s doesn’t anticipate that things will get any better.

In a release, the company outlined that it was “not expecting a major change in sales trend in January.”

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