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Macy’s Has a New Plan for Growth — Making Its Stores Nicer

Macy’s plans to invest more money in 50 test stores this year on everything from new carpets to a bonus pool for workers as part of a plan to keep wind in the sails of its tentative turnaround.

The department store chain, which on Tuesday announced its first quarter of comparable sales increases in three years, is spending $1.05 billion on capital expenditures this year, or $150 million more than last year, on its stores and e-commerce.

Much of that increase is earmarked for those initiatives and many others that make up its “Growth50” plan. That project entails taking ongoing tests Macy’s has been conducting at a store in Woodbridge, N.J. — such as mobile checkout in store and new lighting — to 50 Macy’s stores this year representing a broad cross section of its fleet, as a launching pad for a series of initiatives it can roll out to hundreds more stores in 2019.

Macy’s Chief Executive Jeff Gennette says that while the retailer’s online sales are booming, it needs its stores to be in better shape, have a better assortment, and make better use of space to support both e-commerce growth and the overall company’s health. Macy’s digital sales have increased by a double-digit percentage for 34 quarters running.

“That has to be coupled with a healthy brick and mortar business,” Gennette told Fortune in an exclusive interview to discuss the Growth50 project.

In the first three quarters of 2017, Macy’s store business struggled, but Gennette said that stores where Macy’s had begun to test some new initiatives—such as a bonus pool for workers at a store that met its targets, or having a Backstage (its off-price concept) area—did much better than the fleet average. (Macy’s, which has closed nearly 200 stores in the last three years, still has about 600 stores. Macy’s Inc also owns the Bloomingdale’s chain, which is operated separately.) The company is adding a Backstage to another 100 stores this year.

Gennette recognized that some Macy’s stores aren’t up to par and that the chain’s customer service can leave something to be desired. So a big part of Growth50 involves more staffing, more hours, adding or expanding areas to sell big ticket items such as furniture and bedding, as well as prosaic but essential things such as renovating bathrooms and installing new carpeting and lighting. He also plans to deploy Macy’s My Stylist personal shoppers to all 50 stores.

While one year seems quick for a retailer notorious in the past for its bureaucracy, Gennette is banking on a simplification of Macy’s structure and decision making apparatus implemented a few months after he become CEO to speed up the process. Macy’s has taken steps to allow individual stores and regions more say in what they sell, and Growth50 aims to get that down to the store level, not just in a region. Gennette wants stores to have the discretion to increase the size of an area doing well, or conversely shift away from categories that aren’t.

Macy’s move echoes those of retailers like Target (TGT) and Walmart (WMT), which took the tough medicine in recent years, causing Wall Street some agita, to pour billions more into stores, e-commerce and workers’ pay. But their results have improved.

And Gennette, who acknowledged profit rates will likely be affected in 2018, said such steps are necessary for Macy’s longer term health.

“We’re going after growth and it’s going to take investment to do that,” he said.