Macy’s Inc.'s sales are declining in part because consumers don't want to spend money on the clothes and accessories the company's stores stock, the company's outgoing CEO Terry Lundgren says. They're still more interested in buying automobiles and installing new floors in their homes, he told analysts on the retailer's year-end earnings call.
Sales in the fourth quarter of 2016 totaled $8.515 billion, down 4 percent from total sales of $8.869 billion in the fourth quarter of 2015. Same-store sales spiraled 2.1 percent. Sales in fiscal 2016 totaled $25.778 billion, down 4.8 percent from total sales of $27.079 billion in fiscal 2015. Same-store sales nose-dived 2.9 percent.
Lundgren said Macy’s has faced sales declines before during his lengthy tenure at the company's helm, but those were usually caused by customers’ thinner wallets. “This time consumers have money to spend,” he said. “They are spending on automobiles and they're spending on healthcare and they're spending on home improvement and they're spending on all of those things.”
The beleaguered department store chain’s path forward also depends on its ability to turn shoppers into buyers, he added.
“Clearly the answer has to lie in our conversion of consumers who are shopping in our physical stores into sales. Instead of just shopping and browsing and then clicking and buying either at Macys.com or somewhere else, we need to convert them into purchasers inside of our stores,” he said on the company’s year-end earnings call with investors.
“We're going to spend 2017 trying out various new formats that we do believe will improve our conversion rate. And then the ones that do work, as we've experienced and we've figured out with lady's shoes and with fine jewelry, we'll do those and roll that out hopefully later in the season in 2017 and 2018. So those are still underway.”
Macy’s plans to revitalize its beauty business using lessons learned from recently acquired specialty chain Bluemercury, he added. It will also add more Backstage clearance departments to existing stores, he said.
In fiscal 2016, the company opened 27 stores and closed 66 stores, all as previously announced. Macy’s, Inc. plans to close an additional approximately 34 stores over the next few years for a total of approximately 100 stores. New stores opened in fiscal 2016 included one Macy’s store in Kapolei, HI, 24 Bluemercury freestanding stores, one Macy’s Backstage freestanding store in San Antonio, TX, and one Bloomingdale’s Outlet in Orange, CA.