What: Despite modest holiday sales improvement, Macy's faces mounting pressure from tariffs and cautious consumer spending, prompting aggressive store optimisation and supply chain restructuring.

Why it is important: The convergence of trade tensions, shifting consumer behaviour, and department store decline forces traditional retailers to fundamentally reimagine their business models, making Macy's response a bellwether for the industry's future.

Macy's, America's largest department store chain, reported a slight 0.2% increase in comparable sales across its stores, including Bloomingdale's and Bluemercury, marking its best performance in nearly three years. However, this modest improvement comes amid significant challenges, including consumer spending constraints and margin pressures. The company's turnaround strategy involves closing more than 60 of 150 planned store locations, whilst grappling with the impact of new tariffs on imports from Canada, Mexico, and China. CEO Tony Spring indicated that while current inventory levels shield the company from immediate tariff effects, future impacts will be assessed on a case-by-case basis. This cautious approach reflects broader industry concerns, with other retailers like Target and Best Buy warning of potential price increases for American consumers. Despite these challenges, some retailers, including Warby Parker and TJX, have implemented strategies to diversify their supply chains and minimise tariff exposure, demonstrating the industry's adaptive response to trade pressures.

IADS Notes: Macy's latest performance reflects significant retail transformation trends observed throughout 2024. In March 2024, the company launched a USD 100 million supply chain optimisation plan to address tariff impacts, while November 2024 reports showed the "First 50" pilot stores delivering consistent growth and improved customer satisfaction. The expansion of store closures announced in December 2024 aligns with May 2024 data showing department stores' market share had declined to just 2.6% of retail transactions, highlighting the urgency of transformation efforts. January 2025 results demonstrated strong performance in luxury segments, suggesting that while Macy's faces significant headwinds, its multi-brand strategy shows promise.

Macy’s signals rocky year ahead as retailers reckon with trade war