How Macy’s Hopes To Make It Work This Holiday Season

By: James Flippin · November 18, 2022 · Reading Time: 3 minutes

The Magic of Macy’s

After posting an upbeat report for its most recent quarter in terms of sales and profit, Macy’s (M) boosted its earnings guidance. The department store chain said sales of luxury goods have been robust, and that its shelves are stocked with fresh merchandise. Because products are newer, Macy’s hasn’t had to damage its margins with discounts.

Executives say, with prices holding steady, the company has been able to introduce new offerings in apparel, home goods, and other items that are likely to be purchased as gifts ahead of the all-important holiday season. Inventory — a recent obstacle for many retailers — has been a source of strength for Macy’s. In contrast to competitors’ gluts of goods, Macy’s third-quarter inventory level was down 12% from 2019.

Holiday Wishes

Despite the positive report, Macy’s executives declined to increase their sales forecast, acknowledging that the macroeconomic environment is challenging as holiday shopping gets underway. In the final weeks of October and the early days of November, Macy’s sales numbers dipped. That said, website and store visits held steady.

In some ways, Macy’s entered this year’s fourth quarter at a disadvantage, with its rivals having grown more from pandemic sales. Apparently, stimulus checks weren’t cashed at the department store, with the company’s sales remaining relatively flat over the past few years.

What Consumers Are Doing

Macy’s executives also identified a shift in consumer behavior. In short, shoppers now appear more interested in going out than staying in.

Over the past few quarters, luxury apparel and makeup sales spiked, while pajamas and workout clothes sat on the shelves. Bedding, which was a big seller during the pandemic, is also collecting dust. Macy’s says those trends have held up since the end of the summer.

After a century and a half, Macy’s is still making the market believe in magic, with its higher-end department store chain Bloomingdale’s posting strong revenue in the third quarter, despite record-high inflation. Still, the company has aired on the side of caution looking forward, predicting discretionary spending will take a back seat as people are forced to pay more for gasoline and groceries. These days, you can only be so optimistic — even with magic on your side.

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