By Suzanne Kapner
Macy's Inc. is thinking about starting an off-price business for
its namesake brand, a reminder that Americans remain
value-conscious even though the recent holiday-sales season is on
track to be the strongest in three years.
The big retailer, which already operates outlet stores for its
Bloomingdale's chain, said Thursday that it was forming a team to
explore options for creating a cut-price version of its Macy's
stores.
Retailers have been racing to open outlet stores, seeking to
attract budget-minded consumers as traffic at many full-price
stores has stalled. Saks Fifth Avenue and Nordstrom Inc. are
opening far more outlet stores than regular department stores, and
have joined companies including Gap Inc. and Neiman Marcus Group in
locating outlets closer to their mainline counterparts.
A true off-price format for Macy's would highlight that shift
because Macy's stores already are known for frequent sales and a
steady stream of promotions.
The company has flirted with the outlet business before. In
2013, it opened a Macy's to anchor a wing of full-price stores at
an outlet mall in Gurnee, Ill. Macy's Chief Financial Officer Karen
Hoguet has said the retailer would consider opening more such
locations.
Meanwhile, about a dozen retailers reported holiday sales that
exceeded Wall Street's modest growth forecasts, a sign that sharply
lower gasoline prices, declining joblessness and a stronger economy
are encouraging consumers to shop. That trend could continue into
2015, analysts said.
A handful of those retailers raised their financial forecasts
for the current quarter, including American Eagle Outfitters Inc.
and Aéropostale Inc., teen retailers that have been struggling to
reinvent themselves. None of the retailers lowered their forecasts,
according to Retail Metrics.
Several retailers said traffic improved. Aéropostale and The
Children's Place Inc. said they finished the period with lean
inventories, setting them up for a fresh start to the New Year.
Overall, December sales excluding newly opened or closed stores
rose 5%, more than the 3.8% that Retail Metrics had forecast. Much
of that growth came from the strong performance of drugstore
operators Rite Aid Corp. and Walgreen Boots Alliance Inc. Still,
all but two chains did better than expected for the period,
according to Ken Perkins, a Retail Metrics research analyst.
The exceptions were Costco Wholesale Corp., which sells gasoline
and has been hurt by falling prices, and Fred's, a dollar store
that has been struggling for several quarters.
The upbeat early reading on holiday sales contrasts with the
year-earlier period, when sales fell short for many retailers,
forcing them to lower financial forecasts and leaving them awash in
unsold goods.
Although business has improved from a year ago, when a
lackluster economy and severe winter weather combined to keep
shoppers home, consumers remain cautious in their spending,
particularly at the lower to middle end of the market.
At Macy's, sales excluding newly opened or closed locations rose
2.1% in the combined November and December period, at the lower end
of the retailer's projections.
Gap said sales at established stores rose 3% in the combined
period, though much of that gain came early in the season. In
December, sales rose 1%, driven by an 8% gain at the Old Navy
chain. Same-store sales fell 5% at Gap's namesake chain.
Many retailers continue to face serious challenges as they try
to adapt to a world in which shoppers are buying more online and
browsing less in stores. J.C. Penney Co., for instance, said it
would close 40 stores in 2015, or about 4% of its total. Earlier
this week the department-store chain reported a 3.7% increase in
holiday sales.
Family Dollar said profit for the three months ended Nov. 29
fell 46%, because shoppers mainly came in to buy staples like
groceries and tobacco, both of which have thin profit margins.
Sales at established stores slipped 0.4%
Sales and traffic at the retailer rebounded in December,
culminating in a rush of customers on Christmas Eve, the busiest
single day in the company's 55-year history.
Family Dollar's same-store sales rose 1.2% in December while
traffic increased more than 2%, the strongest gain in more than two
years, said Chief Executive Howard Levine.
But some of the industry's sales gains came at the expense of
margins because of heavy discounting that started early in the
season.
Richard Hayne, the chief executive of Urban Outfitters Inc.,
said the "holiday environment in the fashion apparel industry was
more promotional than any I can recall."
Paul Ziobro contributed to this article.
Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Paul
Ziobro at Paul.Ziobro@wsj.com
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