In this past week’s Macy’s M +0.5% Inc. earnings call, the most surprising news was the opportunity it sees in luxury. It surprised CNBC’s Lauren Thomas too, who immediately got on the phone with CEO Jeff Gennette to get the scoop.
He said the collapse of competing luxury department stores, notably Barney’s, Neiman Marcus, and Lord & Taylor, combined with the announced closure of 16 of Nordstrom’s JWN +2.8% current 116 full-line locations, gives Bloomingdale’s running room to fill the void.
Overall, he identified some $10 billion in market share “up for grabs” because of the disruption in retail. Given the current state of department store retail, Macy’s and Bloomingdale’s have a lot of work ahead to capture some of that available market share.
Amidst the turmoil caused by the pandemic closures, Macy’s Inc. second quarter sales declined by 35.1% overall, to $3.6 billion compared to $5.6 billion last year.
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One bright spot was digital sales, which increased 54%, a significant contribution since digital represented 26% of 2019 revenues, or $6.4 billion out of a total $24.6 billion in sales. For the past three years, Macy’s revenues have hovered just under $25 billion.
Another bright spot this quarter was Bloomingdale’s, its luxury nameplate. “Luxury, particularly at Bloomingdale’s, outpaced our expectations,” interim CFO Felicia Williams reported. “Given our strength in this area, we are leaning harder into luxury in order to capitalize on the shift in spending.”
In its quarterlies, Macy’s doesn’t report segment sales, but for year ended 2019, Bloomingdale’s represented 11% of total corporate sales, or about $2.7 billion, of which $2 billion is generated in stores and the remainder online. Currently, Bloomingdale’s operates 35 full-line stores, including two licensed stores in the Middle East, one furniture store, and 19 Outlets.
The earnings call was short on specifics – aren’t they always – but it announced a focus on these four segments, without providing a definition: luxury, advanced contemporary, textiles, and Bloomingdale’s The Outlet off-price.
While Gennette has his hands full turning around the entire corporation, including the Macy’s behemoth with 613 stores, Bloomingdale’s CEO Tony Spring is tasked with making good on Gennette’s luxury aspirations.
The 55-year old Spring has worked his entire career at Bloomingdale’s, joining the company in 1987 as an executive trainee after graduating with a B.S. in hospitality administration from Cornell.
Over the years, he assumed increasing responsibility, including managing home furnishings, marketing, and Bloomingdale’s direct, and restaurants. He was promoted to Bloomingdale’s president and chief operating officer in 2008, then became CEO upon the retirement of Michael Gould in 2014.