Macy’s launch event for its new private brand, on the 34th, also marked one of the first public appearances by Tony Spring (left) since being named the incoming CEO. Spring is the CEO of Bloomingdale’s, the upscale department store chain of the company. He will replace Jeff Gennett (right) in February.
Melissa Repko | CNBC
New York – Messithe 165-year-old department store chain, is finding ways to keep up with the new kids on the block.
The retailer is facing declining sales, and its stock has struggled in a good year for the market. Now, it’s banking on a wave of new and fresher private brands to attract shoppers, especially as some sell popular direct-to-consumer brands, online companies like Sheen and Amazonand big box players like. target.
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On Wednesday, it unveiled its latest private brand, 34, at its Macy’s Herald Square flagship. The brand, named after the Legacy store’s Manhattan location, is made up of women’s clothing and accessories. The brand is designed for women aged 30 to 50 who want to look modern, versatile and easy to wear.
The new brand is hitting store shelves and Macy’s website at a difficult time for the company and the retail industry. Consumers have cut back on discretionary spending at stores as they are saddled with hefty grocery bills and rent, while spending on experiences like concerts and summer vacations. The department store operator cut its full-year outlook last month, noting that consumers pulled back on purchases of clothing and other items.
34 is the first of four new private brands that Macy’s plans to launch by the end of 2025. It also plans to refresh some existing labels and phase out others.
Macy’s chief merchandising officer Nata Dever said the 34th debut comes after more than two years of customer research.
“They cared about fit, quality and value and had an immense passion for what they were wearing every single day,” he said. “And they deserved better.”
The kickoff event also previewed another piece of Macy’s future: It marked one of Tony Spring’s first public appearances, as he was named its next CEO. Spring, who currently leads the parent company’s upscale department store Bloomingdale’s, will replace Jeff Gennett in February.
Gennett said Wednesday that consumer financial stress continues to be reflected in the company’s sales trends.
Massey cut its financial expectations significantly in June. The department store operator, which includes Bloomingdale’s and beauty chain BlueMercury, said it expects comparable owned-plus-licensed sales to fall 6 percent to 7.5 percent for the year. It expects earnings per share of $2.70 to $3.20 for the year.
Macy’s shares have reflected investor concerns. As of Wednesday, Macy’s stock was down more than 20 percent so far this year. The S&P 500, by comparison, is up 19% this year.
Some of Wall Street’s worries concern the company, as investors question whether the legacy department store can keep up with changing shopper tastes.
Messi has tried to steady the ship in recent years while others have been affected by rapidly changing dynamics. Under Janet’s leadership, the department store launched a three-year transformation plan in February 2020, about a month before the start of the Covid pandemic. It emphasized closing lagging stores, investing in its top-performing locations and accelerating online growth.
Macy’s is leaning towards private brands to drive growth. Its latest brand, On 34th, is designed to be both fashionable and easy to wear. Prices range from $19.50 for a tank top to $299.50 for a leather jacket.
Melissa Repko | CNBC
Private brands are a common way that retailers offer customers lower prices and exclusive merchandise. Labels are more profitable, as companies have direct control, fewer middlemen and scale when making items. Also, since the items can’t be found anywhere else, the retailer isn’t going on price with a competitor.
Macy’s sells a mix of private brands and national brands, including Ralph Lauren, Calvin Klein and Levi Strauss. It has about 25 private brands across categories such as apparel and home goods, including On 34.
In the most recent fiscal year, private brands accounted for about 16% of sales. Yet Messi would like to bring it closer to around 20 percent, which he has hit in the past.
But strategy comes with risks. Target is the poster child for private label success, having hatched and expanded multibillion-dollar brands including children’s apparel brand, Kate & Jack, and activewear brand, All In Motion. On the other hand, some investors have attributed the downfall of now-bankrupt Bed Bath & Beyond to its expensive and aggressive rollout of private brands that consumers didn’t want.
Janet said Massey had thought about the push. It has been gathering customer input while developing the apparel and has also made changes in recent weeks while testing the brand with customers at two New Jersey stores. In addition, he added, Macy’s has years of experience selling private brands with a strong following, such as women’s apparel brand INC and home goods brand Hotel Collection.
The company has also acquired talent from well-known retailers for strong brands, including Emily Irosha-Hillek, a 23-year veteran of Target, as senior vice president of private brands. It hired Brian Riviere, formerly of Gap-owned Banana Republic, Levi Strauss, Lululemon and Nike, as its senior vice president of private brand sourcing, product development and production.
As well as giving a fresh look, Macy’s wanted to increase the quality and fit of its clothing. Over the past three years, he has reduced the number of factories and mills he works with. By about half, Riviere said. By working with fewer partners, it has the leverage to negotiate better prices, save to invest in better fabrics and knits, and have greater purchasing scale than the factories it works with.
He also worked with a technology company to standardize sizes across all of Macy’s private brands. Erusha-Hilleque said universal sizing makes shopping a less guessing game for customers and makes them less likely to return.
The 34 will officially debut in mid-August with about 750 items ranging in price from a basic tank top for $19.50 to a leather jacket for $299.50. His shoe collection will launch in spring 2024.