Department Stores Shift Their Strategies

As the retail landscape has been difficult, especially at department stores, we have been tracking their shifts in strategy. Off-Price, home, beauty and wellness have seen positive comps and department stores are increasing square footage devoted to these businesses.

Macy’s (NYSE:M)

NPD’s Checkout Tracking research shows two-thirds of consumers now purchase at off-price retail outlets. Apparel is most likely to be in their shopping basket.

To compete with off-price retailers, Macy’s is opening more of their Backstage off -price concept. Last year they opened about 15 Backstage shops in their full-price stores. CEO Jeff Gennette has said they will open another 30 this year.

Backstage-JHA View

We shopped Backstage, Macy’s is taking cues from TJ Maxx, Marshalls and Homegoods (NYSE: TJX). However, off-price retailers attract consumers not only because of their lower prices, but the brand names and fashion they carry, which Backstage fails to do. About 80% of the brands are names that are not well known since they don’t want to cannibalize their Macy business. The concept is more of a moderate business at lower prices without name brands, and the concept is mall based where traffic is dramatically down.

JC Penney (NYSE: JCP)

The beauty market has seen steady growth and JCP has seen an uptick with in-store Sephora Shops (LVMH). They have recently announced they will be adding 70 more and will be expanding 32 of their existing shops.

Home is another category that JCP quickly jumped on last year by introducing appliances in their stores. JCP e-commerce is selling bathtubs, bathroom hardware, ceiling fans, home safes. They are also offering heating and air-conditioning systems.

JCP-JHA View

JCP’s increase in beauty and activewear is a positive for the company. However, we are not sure that the largely female clientele of JCP will be swayed by all the hardlines. JCP is known for apparel and that inventory is lacking in trend-led product and execution.

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