By Neil Saunders
That Macy’s has finally bitten the bullet and closed a raft of underperforming stores is, in our view, a necessary evil required to get the company back on track. The blunt truth is that many of these locations are simply not going to deliver solid returns so there is little point trying to revitalize and invest in them. To do so would be to throw good money after bad.
Revitalizing will not be easy. Macy’s needs to completely overhaul the experience to make stores easier to shop, more interesting to browse, and more relevant to today’s shopper. It also needs to develop a much more fulsome exclusive or own label offer to differentiate it from rivals.
There is an argument to be made that Macy’s has, for too long, neglected its store base and has failed to develop a compelling proposition to pull in shoppers in the digital era. However, what is done is done and the company is right to take action to put it on a firmer financial and commercial footing.
In our view, it is vital that the consequent reduction in costs and the proceeds from property disposals resulting from this action are used to bolster the remaining bits of the business. It would be folly to simply use the gains to fund day to day operations or to return to shareholders. Macy’s needs a war-chest to revitalize its stronger stores, improve e-commerce, and develop new service and product offerings. If it fails to do this Macy’s runs the risk of having to shutter a further raft of stores down the line.
Revitalizing the business will not be easy. Shopping trends are firmly against Macy’s, and its brand, while not completely diminished, is most certainly tarnished. In our view, it needs to completely overhaul the experience to make stores easier to shop, more interesting to browse, and more relevant to today’s shopper. It also needs to develop a much more fulsome exclusive or own label offer to differentiate it from rivals.
The jury is still out on whether Macy’s can reinvent itself. However, today’s action is a good step in the right direction.
Neil Saunders is CEO of research firm Conlumino.