Dive Brief:
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Retail analysts at Deutsche Bank are warning that soft sales at Macy’s may be just the tip of the iceberg, downgrading Macy's from "buy" to "sell" Monday.
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In a report Monday, analyst Paul Trussell singled out declining sales of Michael Kors as one of the reasons for the department store’s woes. Michael Kors has seen sales declines and other analysts have warned that the brand has over-expanded.
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Meanwhile, the department store is also facing calls, including a petition drive led by MoveOn.org, to let its Trump-branded merchandise go after Donald Trump made disparaging remarks about Mexican immigrants.
Dive Insight:
E-commerce is rising at Macy’s, as at many department store retailers, but the resulting decline in traffic into stores is hurting sales. Add to that the fact that Michael Kors is everywhere — in many cities, the brand can be found at a Macy’s as well as at a Michael Kors store in the same mall.
The strong dollar is exacerbating the problem, keeping tourists from spending, as is an overall shift from spending on apparel and accessories to tech and experiences, Trussell says. In his report, he also said that he has "low confidence that [Macy’s] can bust out of its same-stores sales rut."
Meanwhile, the controversy over Donald Trump's remarks is a major headache for the retailer, which has a special deal selling his business attire and scent.
The retailer has staked much on a pilot launch of off-price discount stores, Backstage, announced in May. Many observers were puzzled by Macy's decision, though the sector has seen stellar performance, especially as compared to Macy's lackluster sales. The challenge for Macy's will be to ensure that Backstage doesn't dilute the department store's brand, and it remains to be seen whether the move is a boon or a bust.
Indeed, experts have told Retail Dive that department stores like Macy's would find more success by improving their e-commerce operations as well as their in-store merchandise and customer service.
