What: US department stores are growing sales by getting existing customers to spend more per purchase, with Macy's average unit retail up 9% and Dillard's average transaction up 7% on 6% fewer transactions.

Why it is important: Moving upmarket without following luxury to the top preserves the size of the addressable customer base, and the card programmes attached to those larger baskets add a second revenue stream, along with the credit exposure that comes with it.

Macy's CEO Tony Spring told analysts on the second-quarter call that the company can keep raising average unit retail across all three brands, citing better quality goods, leather over faux, brands commanding higher price points, and growth in Ralph Lauren, Coach, watches and fine jewellery. AUR rose 9% in the quarter. The Macy's nameplate posted a 1.1% comparable-sales increase and Bloomingdale's 11.3%.

Dillard's showed the same pattern from a different angle: comparable sales up 1%, transactions down 6%, average dollars per transaction up 7%. Ladies' accessories and lingerie recorded the largest category increase, with home and furniture moderate and shoes, men's apparel and cosmetics smaller.

Luxury moved the other way over the first half of 2026. Gucci comparable revenue fell 5%, Kering Fashion & Leather Goods 1%, and LVMH Fashion & Leather Goods declined 1% organically, while Watches & Jewelry rose 9%.

Card programmes capture part of the larger basket. Macy's booked $156 million in second-quarter net credit card revenue, up 2%, and $328 million across the half against $306 million a year earlier; Dillard's first-half Citi alliance income rose to $21.1 million from $17.2 million.

IADS Notes:  Macy's second-quarter figures were reported in full at the time, with net sales of $4.9 billion, comparable sales up 2.7% and Bloomingdale's up 11.3%, growth attributed to store renovation and luxury assortment rather than retrenchment (Press Release, September 2026). The upmarket tilt is a category strategy as much as a pricing one, and it is being tested elsewhere: Boyner's Communité now draws 25% of its Istanbul store revenue from handbags sourced from emerging, creatively distinct labels rather than status names, a response to the same consumer who is buying selectively at higher price points (WWD, September 2026). The contrast with luxury is documented: Kering posted its first comparable sales increase in three years in the second quarter, with Gucci organic sales still down 2% after an 8% first-quarter decline, and recovery built on 84 store closures and debt reduction rather than demand (WWD, July 2026). Dillard's route to the same outcome runs through inventory discipline, regional merchandising and family control rather than reinvention, which is consistent with a model that grows transaction value while transaction counts fall (Forbes, June 2026). The card economics carry a second reading: Macy's drew 62% of its operating profit from credit card revenue, and Kohl's would have posted an operating loss without it, which makes the payment relationship a dependency as well as a way to capture more of a larger basket (Financial Times, December 2025).

Department stores move upmarket as luxury struggles