Tale of Two Retailers: Macy's Flies While Walmart Flounders

Last Updated Feb 23, 2011 3:30 PM EST

It looks like department stores may be having a moment. The lumbering retail dinosaurs of yore are slimmer and chicer than ever, driving sales up 0.5 percent during the oft-sluggish month of January. In fact, stores peddling general merchandise (think discounters and department stores) pushed sales up 0.8 percent to $51.7 billion, according to the U.S. Commerce Department.

It's not terribly surprising given that the Conference Board's Consumer Confidence Index shot up for the fifth month in a row, the highest since the doldrums of February 2008. While that's still about 20 points lower than it would be if the economy were stable, smart retailers are busy setting strategies in place to make gains.

Macy's marvelous moves

Macy's (M) for instance, unleashed a bunch of targeted apparel initiatives last year that are gathering serious sartorial steam -â€" even as the cost of raw goods, labor, and fuel are rising. The department store chain reported a bump of 5.4 percent in sales o $8.27 billion and comps gained 4.3 percent. Its Bloomingdales stores also got a comps boost to 4.6 percent, that chain's best performance in at least 15 years.

Launching several designer collaborations is just one way Macy's is attempting to capture an elusive consumer: the 18- to 30-year old who buys above fast fashion, yet below high-end designer brands. The plan is to reinvent its contemporary sportswear shopping experience with in-store "Impulse" departments anchored by a private brand venture called Bar III. Bar III also debuted its own pop-up shop which is doing a brisk business in Manhattan's stylish Flatiron District.

Macy's is planning a competitive approach to pricing these new collections, understanding that the market for higher fashion can bear a bit of an increase while not passing the buck to consumers for other basics such as in the children's department.

CEO Terry Lundgren told WWD,


I think the consumer is prepared to spend as long as they believe they are getting great value, and value is determined differently by different customers. Some might feel the lowest price possible is their definition; others might describe it as the highest possible quality and fashion for a reasonable price. That's the Macy's consumer.

Walmart's apparel Waterloo

While team Macy's constructs strategies to appeal directly to the core customer it wants to cultivate, Walmart (WMT) is floundering to recapture the dollars spent by its former devotees. Bentonville's behemoth underwent a radical makeover just before and during the recession to grab the newly-frugal fashionista.

But stylish lighting, swankier fixtures, and hipper clothing assortments failed on two levels. The discount die-hards didn't know where to find their tube socks and didn't care about upping their fashion quotient. More upscale trend-hunters on the other hand, proved to be a fickle bunch, especially when Walmart's designer duds failed to live up to Target's (TGT) accomplished assortments.

Now, couple a massive amount of floor space taken up by goods that aren't selling with a questionable pricing strategy. Walmart tossed aside "everyday low prices" in favor of "rollbacks" on select items, a move that one former executive likened to "a cancer" that gave competitors like Target leeway to hold their prices.

The results have been pretty dismal. Walmart just posted its second straight year of declining comps: 1.8 percent in the 13-week period ended Jan. 28, 2011. Walmart is now in the process of turning the ship around and getting back to its roots. The WSJ says the retailer is recreating its "messy procession of discount merchandise in the main aisles," otherwise known as "action alley." As for alienating the new customers lured by the makeover, they've probably rediscovered the joys of shopping at Macy's.

Image via Macy's

Related:


  • Lydia Dishman

Comments

Market Data

Stock Watchlist