Macy’s Profit Drops in the Face of Online Stores Such as Amazon

• May 11, 2017
• By Pete Nisbet
• 0

Macy’s profit drops:  Macy’s Inc. has reported a larger drop in profit this last quarter than expected. Like many mall stores, the U.S. department store has been hit by increased online purchasing activity. This is another case where well-known department stores should compete better with online sites such as Amazon.

Macy’s have an issue in attracting customers, particularly with the shift by many people to online shopping sites. There has also been a drop in demand for apparel, again likely due to online competition. However, Macy’s profit has remained – unbeatable!

Macy’s Profit Drop Leads to Macys Share Price Hit

Macy’s share price has likely suffered because of this.  The drop in quarterly profit and sales was higher than expected. Macy’s share price fell by 10% on Thursday to $26.40, the lowest for 6 years.  This drop may have resulted in a reduction in the share price of other U.S. department stores. Sales in department stores are dropping in general, and with that so are the share prices. They appear to be unable to counter the threat provided by online stores.

Macy’s response to this competition appears to be cost-cutting. Mall traffic is declining because, not only are people finding it more convenient to purchase online with home delivery, but also find it cheaper to do so. Cheaper in price, cheaper in travelling costs, and cheaper in the event that the item has to be returned.

Macy’s Closing Branches

Not only are Macy’s and its mall competitors having to cut prices, but they are also closing branches and maintaining low inventory stocks while selling their stores and real estate. The company’s merchandise stock increased by over 4% because of low sales and Macy’s profit dropped 39%.

One of Macy’s main competitors, Kohl’s, reduced its in-store inventories and this resulted in a share price hike of 3.2% and a reasonable profit. Kohl’s was able to maintain low stocks by using store inventory to satisfy online orders and also speeded up its supply chain. Nevertheless, sales still fell by 2.7%.

Macy’s Mall Stores Falling Behind Internet Stores

There appears to be a trend showing of mall stores falling behind internet stores.  While internet stores expand and profit, mall stores are losing out and closing down – or downsizing.

While Macy’s profit level is well known in the industry, it has the money and the staff to reduce losing products and to focus on those making more.