Is AI Macy’s Santa’s Little Helper?

In the midst of the holiday season, while numerous retailers anticipate a weak consumer spending forecast amid an inventory glut, Macy’s may have set itself apart.

The chain has moved to implement AI, enabling the retailer to adjust its inventory based on holiday demand.

In the most recent quarterly earnings call on Thursday (Nov. 16), Macy’s CEO Jeffrey Gennette said: “We know our customers are looking for value. So, we have simplified our promotions. We are confident the strategic changes we have made will be well received by our customers.”

In the fourth quarter, Macy’s anticipates an over-indexing in beauty, with sales penetration in this category expected to rise significantly compared to the rest of the year. New partnerships, such as with JLo Beauty, exclusive sets from brands like Chanel, Dior and La Mer, and unique offerings like a make-your-own gift station are expected to contribute to the beauty segment’s appeal.

Embracing the retail-as-theater concept, sister brand Bloomingdale’s has launched its “Best Holiday Ever” campaign, featuring in-store and digital activations throughout the season, where customers can expect curated gift assortments from top brands and immersive shopping experiences, including a Wonka-inspired collection featuring exclusive products from David Yurman, Armani, Reese, and more.

Macy’s also noted that Blue Mercury will be introducing new brands in its skincare, body and fragrance segments, offering in-person spa treatments, complimentary gift consultations and exclusive loyalty member activations.

Looking beyond the holidays, Macy’s said it is confident in becoming a more relevant destination for customers and partners. The company underscored the importance of maintaining a well-balanced portfolio of nameplates, leveraging collective customer insights while preserving each brand’s unique identity. Macy’s envisions utilizing data science tools such as AI and machine learning to enhance decision-making processes, particularly in inventory management, grounded in comprehensive customer insights.

The company said it emphasized variety over redundancy and aimed to strengthen its core business and scale growth vectors.

Macy’s growth vectors include the reimagining of private brands, such as its new private brand On 34th. Small format stores also continue to open and are reportedly generating positive comparable sales and offering a convenient shopping experience. Furthermore, the digital marketplace is scaling, with over 1,500 brands on the platform and a 22% growth in gross merchandise value on a consecutive quarterly basis.

Last but not least, the luxury segment, especially through Bloomingdale’s, is also seen as a winning option for multi-branded upscale retail. Personalized offers and communications, as the fifth growth factor, are being tested and refined, with plans to scale through 2024.

Macy’s by the Numbers

In the third quarter of 2022, Macy’s reported a decline in earnings per share and net sales compared to the same period in 2019 and 2022. The company experienced decreases in brick-and-mortar and digital sales, with comparable sales down on both owned and owned-plus-licensed bases. Macy’s and Bloomingdale’s brands faced challenges in various product categories, while Blue Mercury saw an increase in comparable sales. Other revenue decreased, representing 3.7% of net sales.

The company’s active customer base and the Star Rewards program’s impact on sales were highlighted. Inventory management remained disciplined, with improvements in gross margin and merchandise margin. Delivery expenses as a percentage of net sales improved, and selling, general and administrative expenses decreased.

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