Macy’s expects uncertainty to impact spending until 2024

Macy’s, the US department store chain, expects shoppers to continue spending carefully into the 2024 financial year as the state of the economy remains uncertain. 

Why it matters

As a mass-marketing multi-category retailer, Macy’s outlook offers insights on the fortunes of the wider retail market. With inflation persistent and consumer confidence wobbling, consumers are adapting their spending to fit new circumstances and shopping in new ways. 

“As we think about moving into 2023 versus 2022, we think a lot of the pressure that we saw build over the course of 2022 will continue into 2023 and it seems like it’s going to continue into 2024,” Adrian Mitchell, Chief Financial Officer at Macy’s, told the J.P. Morgan Retail Round-Up conference recently.

“As we think about the different income tiers, what we’ve seen is that there’s pressure on all income tiers,” he added. “We feel that all of those consumers are going to be quite discerning in all of their purchases. But what we focused on is making sure we have the right stuff for them.”

State of play

• Inventory management is essential: maintaining the right level of inventory, the right composition of inventory, and really focusing on profitable sales and having the things that customers need is critical.

• Consider cross-category insights: fashion sales and the Bloomingdale’s brand offer leading indicators of the market that other brands in the company can learn from. The company has tracked the bounceback of occasionwear, travel and luxury through Bloomingdale’s sales.

• Newness matters: “We have the flexibility and the built-in power with reserves to be able to respond… there is always an abundance of product in the industry at a brand level, maybe not a particular item level, but at brand level. So, when a customer starts signaling, we are pivoting,” Mitchell said. 

Building omnichannel capabilities to drive future growth 

Brick-and-mortar spins the omnichannel flywheel and the digital penetration for Macy’s, so it’s always a good thing to have healthy flagships, alongside a strong digital offering.

“We’ve invested in elevating the experience and simplifying the shopping experience throughout the store,” Mitchell said. “There’s just a lot of opportunity to really continue to elevate the experience in those big boxes.” 

Beyond that, “it’s about really landing the ecosystem, which is the digital overlay with the appropriate combination of big box and small box to engage customers when and where they shop.”