Macy's to Fight Retail Woes With Digitalization, Cost Control

Retail is no more constrained to its brick-&-mortar existence. Instead it is rapidly accepting the concepts of an increasingly digitized world as advancing technology and digital transformation are playing key roles in evolving consumer shopping patterns. Retailers are now focusing more on enhancing omni-channel capabilities, optimizing store fleet and restructuring activities. Although Macy's, Inc. M is not fully immune to retail headwinds, this department store retailer is leaving no stone unturned to be on growth trajectory.

This is well reflected by this Zacks Rank #1 (Strong Buy) stock’s bullish run in the past three months in a market that fell victim to escalating trade war between the United States and China. In the said period, shares of this seller of apparel and accessories, cosmetics, home furnishings and other consumer goods surged 23.1% compared with the industry’s growth of 18.1%.

Macy’s Get its Act Together

Macy’s has announced a slew of measures revolving around store closures, cost containment, real estate strategy and investment in omni-channel capabilities to enhance sales, profitability and cash flows. Additionally, management is developing e-commerce business, Macy’s Backstage off-price business along with expanding Bluemercury and online order fulfillment centers.

Moreover, the company had introduced various innovative services including Apple Pay, Same Day Delivery, Enhanced Shopping Apps, Innovation in Stores Selling Technology, Macy’s Image Search and Macy’s Wallet/Bloomingdale’s Wallet. The company’s “Buy Online Pickup in Store” initiative is also gaining traction. The company has added a new feature to its mobile app called Mobile Checkout, which allows customers to scan bar codes of items and pay via smartphones.

Management is realigning operations and focusing on curtailing costs. The company has closed 81 Macy’s stores, as part of its planned closure of about 100 stores announced in August 2016, and plans to shutter about 19 more stores. Further, the company will streamline some of the non-functional stores.

These efforts will result in annual cost saving of $300 million beginning 2018 and would allow the company to invest the same in enhancing digital business and store-related growth initiatives. Macy’s had earlier announced the restructuring of its merchandising operations that includes combining of merchandising, planning and private brands divisions into one segment.

Wrapping Up

Amid a competitive retail scenario, Macy’s has taken several strategic initiatives to adapt to the ongoing changes in the industry. These initiatives have aided the company to post earnings beat for the third straight quarter, when it reported fourth-quarter fiscal 2017 results. The big take away from the quarter was rise in comparable sales after witnessing a decline the past few quarters. Further, management hinted that strategic investments across stores, technology and merchandising are likely to increase comparable sales in fiscal 2018.

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