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New York
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At a glance, the luxury retail market looks bleak. It’s a bit like the meme of the Grim Reaper and his bloody scythe knocking on door after door. Death came for Barneys, for Lord & Taylor, for Neiman Marcus (twice) and, finally, for Saks Global, which filed for bankruptcy protection late Tuesday.
Surely, it’s only a matter of time before it knocks on Macy’s door?
Maybe.
There is another way this transitional phase in retail could play out — one in which Macy’s and its higher-end subsidiary, Bloomingdale’s, manage to continue defying the doom forecasters by focusing on — don’t laugh! —fundamentals.
It turns out that focusing on running a good business might be the thing that customers like.
With Saks sidelined, its biggest rival, Bloomingdale’s, has room to run. Over the past year, as Saks reportedly struggled to pay vendors, Bloomingdale’s has already captured some of its competitor’s business. Bloomingdale’s is well-positioned to keep that up as Saks wends its way through the bankruptcy process, especially if Saks and Neiman Marcus stores close or run short of inventory, retail analyst Neil Saunders told CNN in an email.
That would only add to the momentum that Macy’s has built as an outlier in the post-pandemic Death of the Department Store.
Macy’s barely survived the pandemic-era closures that smothered demand for high-end apparel and drove customers even deeper into the grasp of e-commerce giants like Amazon.
Twice since then, the company has fought off private-equity sharks that were more attracted to Macy’s ample real estate assets than its long-term potential as, like, a store.
In rejecting their buyout offers, Macy’s concluded that the deals weren’t in shareholders’ best interests — a bold move, but also an understandable one when you consider the track record of retailers that got the full PE treatment: Sears, Lord & Taylor, RadioShack, Toys ‘R’ Us, Payless Shoes, the Sports Authority.
Instead, Macy’s doubled down on fundamentals. Nearly two years ago, it named Tony Spring, a Bloomingdale’s veteran, to take over as CEO and clean house. (Literally. A big part of Spring’s turnaround plan has been to simply pick up the messy piles of unfolded sweaters, fix the janky dressing room locks and put actual human staff in place to tend to customers. Fundamentals!)
Over the past two years, Macy’s has closed more than 100 underperforming stores, and it plans to close 14 more this year.
It’s still early, but Spring’s efforts are showing results. In September, Macy’s posted its first quarterly sales growth in years — it was less than 1% year-over-year growth, but it was still head and shoulders above Wall Street’s expectations — briefly sending its stock up 20%. In December, the retailer again beat expectations, reporting its strongest same-store sales growth in more than than three years.
Macy’s isn’t out of the woods, however. Saks and its subsidiaries could still emerge from bankruptcy and give it a run for its money. And the thing that has sent so many brick-and-mortar stores swirling – online retail – isn’t going away.
Plus, the changes to retail over the past five years require a rethinking of the entire department store model. Shoppers have grown disillusioned with the luxury market in particular, complaining of higher prices for lower quality items. The secondhand luxury market is booming via sites like The Real Real. And high-end brands have long ago figured out they don’t need a physical footprint in a department store when they have targeted Instagram ads at their fingertips.
But analysts, including Saunders, see Macy’s focus on fundamentals as the best hope for the industry.
“The bankruptcy of Saks Global underlines how important it is for luxury department stores to focus on the customer and retail fundamentals,” Saunders said. “This is something that Tony Spring and his team have been doing, and they are reaping the reward as a result. What’s happened at Saks will give them the confidence to double down on their plans.”
CNN’s Luciana Lopez and Nathaniel Meyersohn contributed reporting.
