Macy’s Converts 35 Stores to Mini FCs

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Ahead of peak season, Macy’s converted 35 stores into mini-fulfillment centers, creating approximately 1 million square feet of space to fulfill online orders, reduce costs, speed up delivery times and reduce the incidence of painful splits. shipments, executives said during a recent earnings call.

Adrian Mitchell, the department store chain’s chief financial officer, said the semi-automated facilities will allow Macy’s to better leverage inventory in specific markets and regions.

“We are getting smarter about where the demand is and how we can best serve that demand. … . [The mini-FCs] are relatively inexpensive additions to our existing fulfillment network,” Mitchell told analysts. “We also made the appropriate process and technology investments to streamline fulfillment operations across all remaining stores.”

Mitchell said Macy’s upstream and downstream investments are “focused on simplifying our processes and modernizing our technology, further enhancing our ability to get products to our customers faster while increasing supply chain cost efficiency .”

Delivery costs accounted for 4.3% of Macy’s net Q3 sales, Mitchell said, level with last year. “Higher fuel costs more than offset the impact of a 2% drop in digital penetration and lower delivery costs per package,” he said.

Jeff Gennette, Macy’s CEO, said the company is exploring all of its “ship-alone” categories to move that inventory closer to customers to increase delivery speed and reduce costs.

“We have great automation in our mega-centers to make sure we meet customer expectations for delivery time and reduce parcel costs,” said Gennette. “So all that modernized supply chain applies to whatever comes our way with digital business in the fourth quarter.”

The CEO also offered a glimpse into the see-saw Macy’s mix from physical to digital sales has been since the pandemic ensued. In the pre-covid year of 2019, the industry’s new baseline for such metrics, digital was a quarter of Macy’s business and rose to 40% in 2020, as e-commerce became the lifeblood of retail. In 2022, Gennette said, it’s dialed back to 33%, below internal projections of 37%, with digital sales down 9% from last year.

“So, [ecommerce] has been switched back,” he said. “We expect to deliver a strong performance in every quarter in 2019, and we’re working on that.”

Earlier this year, the company decided not to spin off its e-commerce business, as Saks Fifth Avenue had done in 2021. Macy’s closed 125 stores last year and laid off 2,000 corporate employees in an appropriately sized manner.

Macy’s has remained relatively flat in terms of revenue over the past three years, not seeing a significant boost from the pandemic-fueled e-commerce boom or stimulus check spending. Third quarter revenue this year was $5.23 billion compared to $5.17 billion last year, $3.99 billion in 2020 and $5.17 billion in 2019.

One bright spot was Macy’s retail media network, an area experiencing extreme growth across the industry. Net sales for this unit were $31 million in the third quarter, an increase of 21% over last year. Gross margin was 38.7%, down from 41% a year ago, and net profit was down 54%, from $239 million to $108 million.

The Valley Voice
The Valley Voicehttp://thevalleyvoice.org
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.

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