• by Sarah Mahoney  @mahoney_sarah, January 9, 2023

While fourth-quarter sales at Macy's didn't do as well as expected, the retailer says its private-label strategy and new formats are paving the way for a different kind of growth.

The company, which had previously forecast fourth-quarter sales between $8.16 billion and $8.4 billion, now expects them to come in at the low-to-mid-point of that range.

While sales on the peak days, such as Black Friday and the days before Christmas and Hanukkah, did as expected, matching 2019 patterns, "the lulls in between were deeper than we expected," Macy's chief executive officer Jeff Gennette said in remarks at the ICR Conference.

That is especially true for what it calls "self-purchase items," he said. "We look at our business in three buckets, which we call self-purchase, occasion-based and gifting."

People spent strongly on gifts, as well as occasion-based purchases, like party clothes and luggage. But for items consumers need or want for themselves, especially sportswear, casual apparel and some home categories, the sales downturn was "deeper than we expected."

As a result, the outlook for the first half of this year has grown more conservative.

Bloomingdale's and Bluemercury, Macy's spa and beauty business, outperformed. "The luxury sector did quite well," Gennette said, as did its new media network.

Loyalty efforts are also key to increasing sales, with 70% of the customer file now enrolled in this program, up from 50% in 2019.

Private label is key in the retailer's ability to provide both newness and value. "Our penetration of private brands will go up. The team is orchestrating a three-year path to reinvent all of our private brands, refreshing existing ones and developing new ones by looking at the life stages of our very diverse, multigenerational customer base."

As an example, Gennette pointed to success with its INC brand, which quickly copies runway trends.

Expansion of new formats, including the small-footprint Market by Macy's, are also important. The company is opening these in areas where the brand is strong and the digital business solid. But with an omnichannel flywheel uniting digital and brick-and-mortar, it hopes to spark sales increases.

Similarly, it's looking to expand in new geographic regions and just opened Bloomie's, also a smaller format, in Seattle. "We've now got 10 of these, and we're watching the signals very carefully," Gennette said.

The company is also pruning its store portfolios, closing underperforming stores in decaying malls, and announced four closures last week.