Macy’s Pins Hopes on New Marketing

Macy's, Rancho Cucamonga, CA

It all comes down to the marketing for Macy’s.

The beleaguered department store showed a glimmer of hope Thursday when it reported better-than-expected second-quarter earnings. But the chain still expects a sales decline for the year as a whole. Executives called out the brand’s new marketing strategy, rolling out next month, as an expected bright spot.

“We’re excited about the new launch of our marketing strategy in September and the new loyalty program in October,” said Jeff Gennette, who took over as CEO and president earlier this year, on a conference call to discuss the results. The company wanted to “reengineer its entire marketing machine,” he said, adding that both the new strategy and the program “will help our sales trend as we move through the back half of the year.”

Gennette said the loyalty initiative, which will roll out in the first week of October, has already tested well with customers. The company is also simplifying its promotions in an effort to make sales more targeted and compelling. And its new approach to ads calls for a focus on regional, 15-second TV buys rather than national, 30-second spots — the brainchild of Chief Marketing Officer Richard Lennox, who joined last year from Toys R Us.

The idea as a whole is to become more efficient, though the amount of marketing investment is roughly the same, Gennette said. Last year, Macy’s spent $676.9 million on measured media in the U.S., down 16% from 2015, according to Ad Age’s Datacenter.

But it’s an uphill battle for the struggling chain. Macy’s posted its 10th straight quarterly sales decline on Thursday, recording a 2.8% drop in same-store sales. Net sales were $5.6 billion, down 5% from the year-earlier period, while net income, at $116 million, exceeded last year’s $11 million. The company still has 30 stores to close as part of a previously announced cost-saving plan to reduce its fleet of more than 800 locations by 100. In addition to its focus on marketing, the company is also pinning its hopes on Backstage, its off-price division, and Bluemercury, the cosmetics retailer it acquired in 2015.

Though arriving in time for the crucial holiday season, the new loyalty program may not truly take effect with consumers for about 18 months, cautioned Karen Hoguet, chief financial officer. “We believe it’s a good time to be launching it, but we know it takes a long time — roughly 18 months — for a loyalty program to really reach its stride,” she said on Thursday’s call.

Macy’s is not the only retailer showing signs of life. Kohl’s also beat expectations by reporting second-quarter net income of $208 million, a 48.6% increase over last year, and net sales of $4.1 billion, down 1% from the year-earlier period. CEO Kevin Mansell noted on a conference call that key marketing initiatives like more targeted offers and a new pricing campaign helped drive sales.

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