The news
Macy’s grew comparable sales 2.7% last quarter while selling roughly 6% fewer items. The average price of each item sold rose 9%, CFO Tom Edwards said on the fiscal second-quarter call. Together, the two figures imply the unit decline.
CEO Tony Spring says the fewer units are the point. “A higher AUR will ultimately allow us to flow fewer units through the system, which will lower our cost base,” he said.
Labor hours, picks, cartons and store replenishment all scale with units handled, regardless of price. Each dollar of Macy’s sales now carries fewer items to pick, pack and shelve.
The first quarter ran the same way: average unit retail up 8.3% on comparable sales of 3.0%, which implies about 5% fewer units.
What changed
Macy’s has raised its average price by changing what it sells rather than repricing the same goods. Management listed the moves across its last two calls.
Fabrics: leather over faux leather, “more jackets versus T-shirts,” “linen versus cotton.”
Brands: more Ralph Lauren and Coach at Macy’s, Kurt Geiger being added, Tory Burch opening at Herald Square in the fourth quarter.
Categories: watches strong for three quarters; handbags, fragrances and shoes outperformed.
Clearance: less clearance and aged inventory than a year ago, so a larger share of sales comes at full price.
Average unit retail has been rising “for the last couple of years at both brands,” Spring said on the first-quarter call, a little over 5% at Macy’s and 9% to 10% at Bloomingdale’s in the first quarter.
How it works
A department store’s operating cost is mostly handling. A $40 jacket and a $120 jacket take the same carton, the same pick, the same trip to the floor and the same colleague to sell it. If sales dollars hold while units fall, the same revenue moves through fewer of those steps.
Two things have to be true for that to lower cost rather than just sales. The dollars have to hold, which they did at 2.7% comps, and the building handling the units has to be able to shed the labor. China Grove, the 2.5 million-square-foot automated center in North Carolina that opened last year, handles both online orders and store replenishment for the Macy’s nameplate. Edwards said the ramp “continues to progress” and expects supply-chain efficiencies to reach gross margin in the second half, weighted to the fourth quarter.
Replenishment is also getting an AI forecast layer on top of the existing system, “moving from pilot to broader execution, to improve in-stocks and deploy our inventory more efficiently,” Edwards said.
Spring points to Bloomingdale’s as proof: conversion there is lower than at Macy’s, and average price is higher. Higher-priced items, he said, take more visits to sell. He named mattresses, diamonds and quality leather as purchases where customers browse and come back.
The competition
Kohl’s average unit retail fell in the same 13 weeks, CFO Jill Timm said on its second-quarter call. Customers are trading into opening price points and Kohl’s own brands. The chain is promoting “thousands of items under $25.” Comparable sales fell 0.9% and inventory ended down about 3%.
TJX grew comparable sales 4% in the same quarter on a higher average basket and more transactions. Walmart’s US transactions grew 1.5% in its quarter, against a 1.1% rise in average ticket. Macy’s is the only one of the four growing sales on fewer customers buying.
The counter
Conversion fell. Traffic was steady, the basket was larger, but fewer of the people who came in bought. Spring called that the trade-off and said the company is spending more on product pages and top-of-funnel marketing to offset it.
The margin gain this quarter was not the mechanism. Gross margin rose 180 basis points to 41.5%, and net tariff refunds added 180 basis points, per the release. Strip those out and the underlying gain is about 10 basis points. “It is a false narrative to kind of say higher AURs lead to higher margin,” Spring said. Margin depends on the category and the brand; he sees “more of an opportunity to lever on the expense side.”
The expense side has moved a little. SG&A was 38.7% of revenue, down 20 basis points, against Edwards’ standing target of SG&A growth “below the rate of inflation.”
Macy’s guided third-quarter comparable sales between down 0.5% and up 0.5%, against a 3.2% comp a year earlier. If dollars stop holding, fewer units is just fewer sales.
What’s next
Spring said average unit retail should keep rising, though “may not be at the rate” of the last 12 months. The test of the cost claim is the SG&A ratio through the second half, when Edwards expects China Grove’s efficiencies to show, against comps guided flat. China Grove is due to start serving Macy’s other nameplates by late 2027.
