What: Macy’s Inc reports slow consumer demand and poor financial results in Q2 but is hopeful for higher sales during the holiday season and next year.

Why it is important: Macy’s is giving insight into their outlook for the year post unideal Q2 results and how they plan to adapt to changing consumer demands as well as the economic environment.

The company reports a Q2 8% sales drop to USD 5.13 billion from USD 5.6 billion in Q2 2022, as well as a net loss of USD 22 million, compared to USD 275 million profit last year. After the release of quarterly results, Macy’s stock price fell 14%; the projected net sales for the year are still below the pre-pandemic sales figures.

Jeff Gennette, CEO and Chairman of Macy’s Inc., anticipates that the drivers of sales for the holidays will be gift offerings in beauty, merchandising revolving around the 100th anniversary of Disney, Toys “R” US in-store shops, and the Macy’s private brand, On 34th.

As customers have decreased their discretionary spending, Macy’s remains cautious especially due to the clearance of excess spring inventory.

Macy’s also announced the opening of four new small-format stores which signals an optimistic light on the company’s strategy to improve the customer experience and stay relevant as a modern department store. The small format stores ranging from 30,000 to 50,000 square feet, will be opening in Highland Grove centre in Highland, Indiana, South Bay in Boston, Arroyo Market Square in Las Vegas, and Santee Trolly Square in San Diego.

Macy’s Inc. posts Q2 declines, stays cautious on consumers 

What: John Lewis opened its online Christmas shop as online searches for Christmas offers has exponentially increased.

Why it is improtant: The company states that 30% of customers have finished their holiday shopping by the end of October and 72% researched their peak purchases online before buying.

The theme of the shop this year is nostaligia and the enchantment of Christmas which the design team has implemented in the products such as vintage prints. Last year, the company opened its Christmas shop 10 days earlier than planned due to high holiday-related searches which was over four times of those in the previous year.

John Lewis unveils online Christmas shop

What: Drapers delves into the challenges that luxury department stores face and how the businesses can evolve following the departure of the Harvey Nichols CEO, Manju Malhorta.

Why it is important: Top department stores are tackling how to stay relevant despite growing profits and operating losses.

Harvey Nichols has yet to return to profit since the pandemic hit with its latest results reporting an operating loss of GBP 3.7 million in the 2021-22 fiscal year, an improvement from the GBP 17.7 million in the previous year. Harrods has more than doubled its operating profits in the year to January 28 2023, up from GBP 71.4 million- it still has not surpassed its pre-pandemic figure of GBP 237.1 million.

A director of a brand stocked at Harvey Nichols believes that store activations are important for department stores to garner traffic and customers. Examples of this would be Harrods introducing the Prada café or the Dior Christmas takeover.

Another director says that young customers and newer brands are essential for department stores to stay relevant. “Department stores need to understand who their core consumers are and focus 80% on that but it’s also important to play around the edges with the other 20% on attracting the younger innovative customers [with newer brands].”

Loyalty programmes are also useful for gaining sales, as it creates a more personal experience for shoppers. Harrods has launched a scheme like this with its invitation-only members’ club in Shanghai, and Selfridges has done the sale with its Selfridges Unlocked feature that gives exclusive offers to members.

How to reinvent the luxury department store 

What: Rolex SA is buying Bucherer AG in a deal that will give Rolex a presence in consumer sales.

Why it is important: The purchase of Bucherer will allow Rolex to start selling its watches in its own stores as the only store owned and operated by Rolex is in Geneva.

Bucherer will continue to operate independently, keep its name, and sell other watches. The deal between companies was done in part based on its long-term relationship. This acquisition is the second major shift in retail strategy for Rolex after it launched its authentication certificate program in December for used watches at authorized dealers.

Rolex to buy Bucherer in major retail move for Swiss giant

What: John Lewis is not finished with its necessary upgrade which will allow to reconnect with profits. Apart from side projects (housing) it is also taking significant, down-to-earth steps, such as introducing BNPL as a payment option.

Why it is important: One may wonder if such an introduction does not come too late as the big wave is behind us and both customers and governments are already starting to question the consequences brought by the BNPL options.

The John Lewis Partnership is considering implementing a buy-now-pay-later system, inspired by Klarna, to cater to younger consumers' expectations. This move aligns with the rising popularity of such payment methods, particularly among young women.

The retailer's ongoing recovery plan, aimed at cost reduction, improved customer service, and diversification into sectors like private rented housing, was discussed by CEO Nish Kankiwala.

The plan, focused on customer-centricity, cost efficiency, and enhanced technology, seeks to achieve £200 million in profit within two years and £400 million by 2025. A previous loss of £234 million, driven by inflation, was reported in March.

John Lewis introduces Buy Now Pay Later schemes

What: K11 newest stores enjoy high traffic and sales.

Why it is important: They aim at resetting retail by offering a different experience including community and culture. No information is given on profit however.

K11 Musea and K11 Art Mall are experiencing their highest footfalls and sales since their launch, with a 120% increase in sales at K11 Musea from pre-pandemic levels. The "cultural commerce" model has attracted high-end consumers, leading to a 260% increase in sales among luxury brands compared to before the pandemic. Around 30% of tenants have achieved record-breaking sales results. The model's success is driving demand for shop space among premium businesses, maintaining K11 Musea's occupancy rate at 98%. The malls are expanding their tenant mix and adding international brands like Maison Kitsune and Maison Margiela Fragrances to their lineup. K11 Art Mall is introducing retro fashion boutiques to attract new customers.

K11 Art Mall and K11 Musea report their highest footfall and revenue

What: New internet giants appear in Asia and the West should notice.

Why it is important: Coupang started by  offering discount items in Korea, but is now leading the market and growing upward by starting to sell fashion and luxury, to the point of worrying market players such as Lotte, Hyundai or Shinsegae.

Korea’s e-commerce giant, Coupang, posted an impressive Q2 performance and is optimistic about its global potential. Despite Indonesia’s recent restrictions on selling low-value imported items to protect its local SMEs, Korea is embracing international e-commerce, offering cheaper foreign-sourced goods.

Coupang’s “global marketplace” connects Koreans with international sellers and vice versa, benefiting Korean and Taiwanese consumers alike. Although Korea has historically protected domestic industries, Coupang supports free trade, especially given the challenges in their domestic market.

They previously exited Japan due to fierce competition, and their current expansion in Taiwan, centered on rapid delivery, is crucial. Despite impressive Q2 figures (USD5.8 billion revenue, USD145 million profit), Coupang faces internal challenges, with staff forming unions over concerns like automation. Investors are keenly observing Coupang’s Taiwan strategy.

Why Coupang is optimistic about its global marketplace development

What: London’s Oxford Street anticipates up to GBP 100 million in investments before the end of the year thanks to the rolling high-profile deals in the area.

Why it is important: The investments along with various councils which are attempting to aid in the recovery of Oxford Street, will bolster the area.

BNP Paribas Real Estate figures showed that there has been an up-to-date GBP 810 million that have already gone to retail investments in the first half of the year. This includes the GBP 103 million purchase of YSL’s flagship by Swatch Group.

Oxford Street to reportedly see GBP 100 million investment

What: Nordstrom releases its Q2 earnings and forecasts for the FY23 revenues.

Why it is important: The results reflect the company’s progress on the Nordstrom Rack division, its inventory productivity, and supply chain optimisation. US shoppers saved the day in Europe, but US retailers are struggling domestically which could generate a snowball effect.

The company surpassed expectations and reported Q2 earnings of USD 137 million, earnings per diluted share of 84 cents and EBIT of USD 192 million. Net sales decreased by 8.3% compared to 11.6% in the first quarter. GMV also decreased by 8.5%. Shareholders received a quarterly dividend of 19 cents per share.

Nordstrom Inc. saw substantial improvement in sales at both Nordstrom and Rack. Kid’s and men’s apparel performed better than average for the quarter while active and beauty grew by low single-digits versus 2022.

Nordstrom's stock initially rose but later dropped almost 5% in after-hours trading. The company is expecting a decline in revenue of 4% to 6% for the year and earnings per share betzeen USD 1.80 and USD 2.20, excluding charges related to the Canadian operations wind-down.

Fashion United 

Seattle Times 

What: Shein enters a partnership with Forever 21 owner, SPARC Group, and will sell Forever 21 clothing on their website as well as sell Shein items inside Forever 21 stores.

Why it is important: The partnership will allow Shein to test out brick-and-mortar sales and distance itself from new competition such as Temu. The company is redefining every aspect of the fashion distribution business.

In the deal, Shein gained a one-third interest in SPARC, and SPARC became a minority shareholder in Shein and will facilitate the expansion of Forever 21's distribution on Shein's platform which boasts over 150 million users. Industry experts suggest that the partnership could benefit both companies, but Shein might have an edge due to its current market position and growth strategy.

Shein aims to evolve past being only an online seller for cheap trendy clothes and expand into becoming an e-commerce marketplace, like Amazon, and getting third-party sellers to expand its offer outside products its manufactures.

Buisness of Fashion 

Footwear News 

What: Department stores are increasing efforts to appeal to foreign tourists because local consumers are more budget-conscious amid rising debt and interest rates.

Why it is important: Sales are being driven by tourists in South Korea thanks to the growing popularity of K-beauty, K-fashion, and K-pop.

Lotte Department Store is improving its K-fashion to attract foreigners by opening more Korean brand stores such as Ader Error and Mardi Mercredi at its Jamil branch and Martin Kim at its Myeong-dong branch.

Shinsegae also noticed sales from foreigners increase by 460% between January and July in their Sogong-dong branch and 465% at its Busan branch.

The Hyundai Seoul store has also become a popular stop for tourists and the proportion of sales to foreign customers has reached 16% and 12% at the Gangnam and Yeouido branches respectively.

Department stores go all out to attract tourists

What: Le Bon Marche reveals its renovated jewellery space after a year of renovations and its new services.

Why it is important: The revamped jewellery section will offer personalisation services and become a point of attraction for shoppers.

The space is 3,200 square feet and houses 17 brands, both local and international. There is a central pop-up space that will first feature the Spanish brand, Simeuro.

Products offered at the new space include a charms bar with Aurélie Bidermann, permanent jewellery by Atelier VM and Vanrycke, and personalised gold-plated and silver medals by Medai. There is an aim to keep the selection affordable with prices under just EUR 100 on average and up to EUR 2,000 for fine jewellery. The store also does not want to gender the department and is giving space to brands that resonate more with a male audience.

The renovation was on par with Le Bon Marche’s sustainability ideology with over 50% of materials being reused in the new space, new materials being sustainably sourced, and mechanically assembled parts that will allow the reuse of materials in the future.

Le Bon Marche steps up personalisation in revamped jewellery space 

What: Even though the situation is not as dire as a few months ago, as luxury still helps, department stores in London face a diverse reality: the increase of visitors in the UK is not not translating to retail sales.

Why it is important: Just like in Paris, many questions are rising when it comes to what would be a sustainable number of department stores on a reconfigured market marked by touristic flows changes and Brexit.

British luxury department stores are navigating a challenging retail landscape even though their revenue is on the rise.

Harrods has reported a substantial rise in pre-tax profit due to increased tourism and successful collaborations with brands like Dior and Louis Vuitton. Meanwhile, Harvey Nichols has seen revenue growth, although its flagship store's performance is still recovering to pre-pandemic levels. Selfridges faces financial pressures with significant debt after being acquired by Thailand's Central Group and Signa in 2021.

The New West End Company highlights the absence of tax-free shopping as the primary cause, which is leading international visitors to spend less in the UK. Although flight bookings from the US to London rose 17%, spending by American visitors in the West End dropped 1%. Meanwhile, travel from GCC countries to London increased by 7%, but their spending fell by 17%.

In contrast, US and GCC spending in European countries like France, Spain, and Italy surged significantly. Dee Corsi, CEO of New West End Company, emphasized the importance of international visitors to West End businesses and warned about the adverse effects of Britain no longer offering tax-free shopping.

Additionally, 77% of international visitors expressed they would spend more if they could reclaim VAT. Corsi urged the Government to reconsider its stance on the tourist tax, suggesting its removal could benefit the UK economy by around £350 million.

Despite challenges, luxury brands are reimagining distribution, focusing on immersive experiences, and asserting more control over product representation, which brings good and bad for department stores. On the positive side, pop-ups and creative collaborations are driving growth and offering unique customer experiences.

WWD

The Retail Bulletin 

What: Neiman Marcus launches its 2023 fall campaign, “New Frontiers” that marks a creative departure from previous campaigns.

Why it is important: The company aims to showcase its history and lineage to evoke a sense of nostalgia in its customers.

There are 53 brands featured in the campaign which was shot using the innovative technology of Stagecraft in a New York City studio - a cost effective alternative to hosting photoshoots on actual American landscapes. The Nieman Marcus catalogue, “The Book” will be produced in a limited-edition hard cover version and sent to top customers while soft cover versions will be distributed still to all.

The campaign introduces an anthology profile series called 'The Achievers' which spotlights five individuals each season; this inaugural edition highlights Wes Gordon, Cornelia Guest, CeeDee Lamb, Gregg Araki, and Amy Sall.

The company is executing a marketing plan across all channels that includes retail presentations, windows, print, stills, videos, connected TV, and digital screens.

Neiman’s fall campaign tackles ‘new frontiers’

What: Marks & Spencer is on track to enter the FTSE 100 after a great performing year and a best performer on the FTSE 250.

Why it is important: M&S is returning to its glory days with its stellar financial performance.

M&S’s shares are up 61%, it has a valuation of GBP 3.97 billion and is close to entering the FTSE 100 depending on the figures announced in November as the FTSE is reshuffled quarterly. Deutsche Bank predicts that M&S will be back in the top 100, a position that it lost in 2019.

M&S on track to re-enter FTSE 100

What: Harrods has closed a remarkable year thanks to a sustained activity in fashion.

Why it is important: Harrods is increasingly positioning themselves as the only world-class luxury destination, which is one of the two options that is increasingly emerging as viable for department stores (the other one being to become the only one-stop shop for tourists and locals).

Harrods, the luxury department store in London, experienced a significant surge in profits, recording £171.6 million ($217.9 million) in the year to January 2023, with sales rising by 52% to £994 million.

This remarkable growth was attributed to the return of big-spending tourists following pandemic-related disruptions.

Harrods' recovery was facilitated by its year-long uninterrupted operation, along with investments in its physical and digital presence. While other department stores struggled, Harrods' success stands out.

Plans for the future include expanding services such as private shopping and introducing new womenswear and furniture rooms. Despite challenges, the retailer's focus on innovation and exceptional offerings has driven its remarkable performance.

Harrods has recovered from the covid woes

What: Lotte Department Store announces the launch of a ‘K-Beauty tour’ service for foreign tourists.

Why it is important: Purchases of beauty products by foreign tourists from January to July increased by 500% from last year.

The store will give tourists free beauty pouches that contain large samples of beauty products from domestic brands. The samples are worth over USD 115 and will be dispersed on a first-come, first-served basis.

The tour service will begin this month in the main Lotte store in Seoul and eventually expand to the Jamsil and Busan branches.

South Korea’s Lotte Department Store launches ‘K-Beauty’ tour service 

What: Fashion brands are experimenting with alternative methods to reduce e-commerce returns without losing customer loyalty.

Why it is important: Returns of online fashion orders in the US incur around USD 25.1 billion in processing costs so retailers are making the process more difficult for customers.

Of the 72% of Americans who made an e-commerce return and believed the process was harder than usual, 91% said that the ease of their returns experience affected their willingness to shop with the retailer again.

Retailers are trying methods of social conditioning to incentivise the behaviours they want. For example: waiving the return fee if the customer is willing to change their return to exchange or receive store credit instead, setting a minimum annual spend to receive free returns the next year, or setting a nominal fee (percentage of the sale) for the return.

Brands are also considering the logistics of the returns. A Turkish brand, Bocan Couture, offers free shipping to customers but asks customers to pay to return products and offers an exchange rather than a refund. Zalando has a high return rate of 50% so its stores products based on the likelihood of the returned items being sold into a different region using a proprietary algorithm.

Poor sizing is the leading reason for returns so Zalando for example is using an AI tool that gives customers size recommendations for specific clothes by using predicted measurements from photographs. In addition to this, previous customers can also provide information about the fit of the garments. The company is now developing a 3D try-on experience.

After reconsidering free returns, fashion brands get creative

What: Asos partners with Rokt to provide shoppers with targeted content.

Why it is important: The partnership will improve Asos’s retail media division.

Asos will be able to use first-party data to personalise shoppers’ experience as well as show relevant non-endemic offers from Rokt’s marketplace. This will boost Asos’s retail media division which Is a growing revenue source for many big chains.

Retail media revenue is predicted to overtake TV revenue by 2028.

Asos joins forces with Rokt to boost retail media business 

What: John Lewis Partnership is recruiting over 10,000 temporary roles in the UK across its brands to prepare for Christmas.

Why it is important: This number also includes 1,700 permanent positions in management in undisclosed departments. John Lewis and Waitrose aim to deliver exceptional service to its customers throughout the Christmas season and are hiring for positions in multiple points of distribution and customer service.

Waitrose is hiring over 2,8000 seasonal roles in its 329 shops and John Lewis is hiring over 2,900 temporary roles in sales, merchandising, warehouse, and delivery positions in its 34 shops via associated recruitment agencies.

The jobs will be going live throughout September and October; all new hires will receive customer experienec training.

Retail Gazette 

The Retail Bulletin 

What: Macy’s is launching 4 new private labels in order to differentiate on the market.

Why it is important: This part of the business has remained essential for department stores across decades, and have gone through various cycles. After having been used to fill in gaps in price maps, they are now, and the IADS advocates for such a use, part of the retailer’s brand expression.

Macy's is intensifying its efforts to boost its private brand business with the launch of four new private brands by the end of 2025. The company's private brands currently make up around 16% of its annual sales, a number that it wants to increase back to around 20% as it did before the pandemic.

The first of these, called "On 34th," is set to launch on August 17. Macy's aims to expand its private brand offerings to cater to its customers' needs and desires while enhancing brand loyalty.

Macy's has conducted extensive research and data collection to inform its private brand strategy, focusing on customer preferences and trends. With this initiative, Macy's aims to differentiate itself in the market and attract more customers to its high-margin categories like apparel.

Inside Macy’s plan for private brand 

What: FJ Benjamin reports their annual earnings for the year ended June 30th.

Why it is important: FJ Benjamin shared their profit growth as well as cautiousness regarding future revenues due to weakening economies. It shows that fashion brands have alternative avenues for growth than the department store format in the world, including in department-store format-friendly market such as Southeast Asia.

The company reported a net profit of SGD 3.5 million (19% increase), with revenues increasing 7% year on year to SGD 86.5 million. With the lifting of Covid-19 restrictions, FJ Benjamin saw a recovery in sales in all three countries that it operates its 148 stores in (Singapore, Malaysia, and Indonesia), but is still cautious due to inflation. An exchange rate loss of SGD 3 million was noted due to the weakening Malaysian ringgit. There was a 9% decrease in sales in the second half of the fiscal year compared to the first due to weaker consumer sentiments; operating expenses rose 10% because of higher rents and staff costs.

The company also launched a multi-brand luxury retail format, Avenue On 3, in Singapore’s Paragon Shopping Centre, combining a footwear retail space, cafe, beauty treatment suits, a champagne bar, and a chocolatier. The opening of this was well received.

Business of Fashion 

Inside Retail

What: Target goes more fragmented when it comes to logistics, in order to increase speed and flexibility.

Why it is important: Ship from store is also increasingly adopted by department stores, as it maximizes efficiency.

Target has transitioned to using smaller regional warehouses over the past five years. This strategy, adopted by other giants like Amazon and Walmart, helps reduce inventory, trim shipping costs, and expedite deliveries by keeping goods closer to customers.

It represents a shift from centralized mega-warehouses. The benefits include quicker online order fulfillment and faster store replenishment. Such smaller hubs, or "flow centers," using automation, allow for efficient handling of large order volumes.

Target's implementation of this system led to a 17% inventory reduction and improved in-stock rates. Their flow centers in locations like Chicago and New Jersey have cut replenishment times by 20%.

Online orders are packaged at stores and sent to sortation centers for quicker delivery. Target aims to expand this system, planning five more sortation centers by 2026. Amazon and Walmart have adopted similar logistics strategies, focusing on regional distribution and quick deliveries while reducing overall inventory.

Target goes local to speed up order deliveries

What: Top department stores in the US are noticing delays in in-store credit card payments and consumers decreasing discretionary spending.

Why it is important: While the article's focus is on the challenges in the US retail landscape, it's crucial to acknowledge that the situation there might differ from the rest of the world. However, it remains important to recognize that specialization and strategic customer targeting will play pivotal roles in the years to come.

US department stores such as Macy’s, Kohl’s, and Nordstrom are grappling with ongoing issues in attracting shoppers, largely due to cautious consumer spending. Macy’s reported a net loss of $22 million in its second quarter, while Kohl’s profits plummeted by 60%, and Nordstrom witnessed an 8.3% decline in net sales. Overall, department store sales have decreased by 1.5% in the initial seven months of 2023 compared to the previous year.

The persistent inflation poses a significant concern for these establishments, as escalating prices deter purchases of items like clothing and toys. Even with a slowdown in inflation rates, the situation remains more challenging for these stores when contrasted with their pre-pandemic performance.

Multiple factors contribute to the dwindling appeal of department stores: the range of products they offer, their pricing strategies, and the perceived value of their offerings. While certain categories, such as beauty and designer apparel, are performing well, other segments like men’s apparel and handbags encounter hurdles. The arrangement and abundance of merchandise significantly impact sales, with several stores being perceived as overly crowded or uninviting.

To adapt, department stores are reconsidering product placement and concentrating on high-demand categories. However, differentiation of products remains a challenge in a market where consumers can find similar items across various outlets. Altering pricing strategies, including reducing promotions, could potentially backfire, driving customers towards other discounted platforms like Amazon.

Private brand offerings present a potential avenue for growth, with Macy’s and Nordstrom receiving positive feedback for their in-house brands. Nonetheless, a broader perspective reveals that department stores have been steadily relinquishing market share to online and specialty retailers. In terms of market capitalization, Ulta Beauty now surpasses the combined value of Macy’s, Kohl’s, Nordstrom, and Dillard’s. The decline of the department store model is evident, with an annual market size reduction of 4.1% between 2018 and 2023.

Historically, department stores have lagged in adapting to evolving retail trends. While they made advancements in digital sales during the pandemic, many struggled to define their brand clearly, leading to consumer confusion due to new formats. The landscape continues to be intensely competitive, with direct-to-consumer brands, online outlets, and major retail chains posing substantial challenges.

The future of department stores remains uncertain. To sustain themselves, these traditional retailers must devise compelling strategies to attract customers away from competitors like TJ Maxx, Ulta, Target, and Amazon. Failing to do so might result in these stores fading into obscurity.

Fashion Network

Modern Retail