Key Highlights
- In 2022, both Macy’s Inc. and Nordstrom Inc. experienced declines in online sales due to struggling with promotions and discount pricing to sell excess inventory.
- While Macy’s reported a 9% decrease in digital sales for the fourth quarter ending Jan. 28, 2022, it was 24% higher compared to the same period in 2019.
- On the other hand, Nordstrom’s digital sales for the same period were down 13% YoY, constituting 40% of total sales.
Macy’s attributed its decline in gross margin to markdowns and promotions that were larger than in 2021, reflecting its commitment to ending 2022 with inventories at the right level and composition.
Macy’s CEO, Jeff Gennette, stated that the company is focused on growth areas, including private brands, off-mall expansion, and luxury goods. Same-store sales fell by 2.7% in the fourth quarter, supported mainly by Bloomingdale’s and Bluemercury, Macy’s higher-end brands, while the namesake brand’s sales fell by 3.3%.
Gennette expects a decrease in discretionary spending and a shift towards essential goods and services while expecting strong gift-giving and occasion-based product demand.
Challenges Faced By Macy’s and Nordstrom In Online Sales
Like Macy’s, Nordstrom faced challenges in selling discounted items, resulting in struggling sales at its off-price Rack business. Despite the success of discount competitors such as T.J. Maxx and Ross Stores, Nordstrom Rack’s sales remained below pre-pandemic levels, indicating a loss of market share.
In contrast, Nordstrom-banner stores experienced a smaller drop of 2.4% in sales compared to Rack’s 8.1% decline. However, executives shared plans to open 20 Rack stores in the spring as off-price consumers generally prefer shopping in-store. Additionally, Rack stores are less expensive to build than department stores.
In recent months, sales at U.S. department stores have been inconsistent due to some shoppers’ reduced spending amid persistently high inflation. Companies that accumulated excess inventory during the pandemic consumption surge are now struggling with markdowns that impact their profits. Nordstrom believes reducing merchandise and winding down its Canada operations will help improve performance in 2023.
