My Note on Macy’s Undisclosed Brick-and-Mortar Swoon

The dirty secret Macy’s is hiding.

Unlike Sears, Macy’s didn’t miss the train on online sales. But it uses its vibrant online business to paper over the decline in its brick-and-mortar business.

When Macy’s reported third-quarter earnings this morning, it made a big deal out of its same-store sales increase, showing a 3.1% year-over-year increase. It was the first line in its report. “Comparable sales,” it calls them wisely, leaving “store” out of the term, as we’ll see in a moment.

Overall net sales rose 2.3% in Q3 compared to the same quarter last year. This rate of growth was just under the rate of consumer price inflation of 2.5%. So it’s not a lot to write home about. As all major retailers, Macy’s divides sales into two categories:

  • Sales at its brick-and-mortar stores
  • And “digital sales.”

Macy’s doesn’t disclose dollar figures on its brick-and-mortar sales or its digital sales, and it doesn’t even disclose percentages, other than saying that online sales booked a “double-digit” increase.

The company has spent a fortune building up its various online platforms and its order fulfillment infrastructure, including fulfillment centers spread around the country. According to a report from eMarkter in July, in terms of share of US online retail sales, Macy’s is in eighth place.

While it’s far behind the heavyweights Amazon, eBay, Apple, and Walmart, the comparison is not fair because Amazon and eBay sell everything, from diapers to chainsaws. Macy’s various brands are much more specialized. Nevertheless, it’s right in the same ballpark with Home Depot, BestBuy, QVC Group, Costco, and mega-cash-burning online-only furniture-retailer Wayfair:

Share of online retail in the US:

  1. Amazon [AMZN] 49.1%
  2. eBay [EBAY]: 6.6%
  3. Apple [AAPL]: 3.9%
  4. Walmart [WMT]: 3.7%
  5. Home Depot [HD]: 1.5%
  6. BestBuy [BBY] 1.3%
  7. QVC Group [QVCA]: 1.2%
  8. Macy’s [M]: 1.2%
  9. Costco [COST]: 1.2%
  10. Wayfair [W]: 1.1%

But here is what you should know about its same-store sales:

When Macy’s claimed in the first line of its report, “Comparable sales growth of 3.1% on an owned basis; 3.3% on an owned plus licensed basis,” its “comparable sales,” as it calls them wisely, include all online sales, and thus are inflated by the boom in online sales.

Mall owners and mall creditors thinking that Macy’s won’t close any more anchor stores in future years based on these growing same-store sales, think again. These numbers are not same-store sales; these numbers include all its online sales.

Here is how Macy’s defines that “increase in comparable sales”:  “Represents the period-to-period percentage change in net sales from stores in operation throughout the year presented and the immediately preceding year and all online sales.”

With total sales ticking up only 2.3%, and with online sales surging in the double digits, sales generated at its brick-and-mortar stores must have fallen. This is the dirty secret Macy’s is hiding by not giving us the numbers by category. And those who use Macy’s figures to show that the brick-and-mortar meltdown doesn’t exist are willingly drinking the Kool-Aid.

Bankruptcy can only restructure debts; it cannot revive mutilated brands and bring back mauled customers. Read…  Dead Meat Walking: Why Sears Will Be Liquidated

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  54 comments for “My Note on Macy’s Undisclosed Brick-and-Mortar Swoon

  1. Petunia says:

    Another dirty little not so secret fact affecting brick and mortar is all the tax giveaways by localities, to bring in new businesses at the expense of long standing loyal ones.

    Now in NY, Macy’s will need to compete harder against Amazon and the amazing package of incentives Amazon received to bring its HQ to the city. Walmart also has benefited from local incentives all around the country at the expense of local businesses.

    We are replacing tax paying brick and mortar with subsidized businesses. I hope the jobs materialize, but I’ve seen this show before, when the subsidies end the subsidized businesses leave. By then the loyal taxpaying ones are long gone.

    • BradK says:

      When the Macy’s Thanksgiving Parade becomes the Amazon Thanksgiving Parade we’ll know for sure.

    • EscapeArtist says:

      How about municipalities stop cutting special deals and lower ALL taxes across the board? No favorites.

      • James says:

        Why don’t all corporations pay all their taxes and stop forcing communities to cut their own throats?

    • Setarcos says:

      Over $100,000 in corporate welfare subsidies for every new supposed employee in NY for Amazon. Bezos, richest man in the world and WaPo owner, forcing folks on the working/fringe out of NY while getting a few billion in subsides. Glad the Dems are looking out for the workers.

      • HowNow says:

        Gee, I didn’t know that the Walton family is Democrat.

        You’ve got that story backwards, and it’s about 100 years of it being backwards.

    • Bill says:

      Excellent point. We need to either stop touting free market capitalism or start practicing it.

  2. Howard Fritz says:

    I remember reading an article here a while back about decreased foot traffic Malls nationwide are receiving, having witnessed it myself I must say it is quite alarming to witness in person. On an aside, I never believed that clothing sales would be so popular in the online sphere.

    • Alistair McLaughlin says:

      It’s a hugely expensive way to sell clothes. People will order $1000 or more of clothing or shoes, then decide to return the whole order – to the nearest bricks and mortar store. Which they can do. My wife manages a retail store in a mall. Yesterday one customer returned $1200 worth of stuff she ordered online – several coats and six pairs of boots/shoes. People click compulsively, then see their credit card bill, panic, and return it all. Or their spouse sees the packages and says, “Take it back we can’t afford that.”

      The actual store fronts become nothing more than return depots for all the online crap people ordered but couldn’t afford, or couldn’t fit. How do you prevent such ridiculous returns? Some companies will reach the obvious conclusion – shut down the store fronts. I hate ordering clothes and shoes online. There is almost always a problem with the fit or finish. But I might not have a choice if present trends continue.

      • HowNow says:

        My wife doesn’t return much at all. But she knows someone who orders enough to get free shipping, then returns the stuff she doesn’t use.

      • Clete says:

        Alistair, your wife’s experience brings up a question: do those returns count against the store’s sales for the day?

        This *might* be a *partial* explanation for the same-store decline at Macy’s — if people pay online, then credit in-store, that affects both numbers.

        • Louis says:

          Alistair, your wife’s experience brings up a question: do those returns count against the store’s sales for the day?

          Basic accounting says that net sales = sales-returns.

          When I worked retail, the store goals were often based on net sales not gross sales, so yes large returns could definitely hurt a stores sales numbers.

        • Wolf Richter says:


          Yes, sales are net sales. But the timing can be off. This is an issue over the holidays when sales are booked in December and the returns show up in January. That’s why retailers run their fiscal year through January, which gives them a “holiday quarter”: November, December, January. So on a quarterly basis, it washes out.

  3. Nice catch. Makes a lot of sense, especially if you have visited a brick and mortar store lately. I know ours is generally not that busy, and the Sears in the same mall just shuttered a few months ago.
    I suspect there will be a lot more defaults before this cycle is complete…

  4. OutLookingIn says:

    On a similar financial page –

    The quality of ‘Investment Grade Debt’ is the worst its been since 2008.
    (and we all know what occurred then)

  5. IdahoPotato says:

    The only reason I go to Macy’s is to pick up an online order at the front desk. No “browsing” or impulsive buys and it has to be less expensive than anywhere else.

    Ditto with Home Depot. Wish Costco provided the same service.

    If there are more people shopping this way, I can see why brick and mortar retail is dying.

    • Fred says:

      So is that an online, or brick-and-mortar sale? The reason I do it with Home Depot, Dollar Tree, and SamsClub is that allows me to have someone else pick up the stuff for me. Too lazy to do my own, especially since so many online retailers are charging sales tax now. (use tax, shhh)

      I have noticed that many of my cohorts are more willing to use “brick-and-mortar” again, now that so many of these retailers are paired with internet shoppers/deliverers (e.g. Instacart, Shipt)

    • Paulo says:

      You can buy online with Costco, and if you have an exec membership delivery is free. Some years ago we had some visitors coming so I ordered a bicycle from Costco online so everyone would have something to ride. It was delivered within 2 days by courier. Apparently I can do this with groceries but I don’t bother as I work a costco run in with other town business. I live 75 miles from Costco so it’s a big deal. We buy just enough over the year that the % rebate pays the membership fees. My son needs some new appliances so I will most likely order them for him and use the delivery option.

      • IdahoPotato says:

        I ordered some appliances from Costco recently. If you use their Citi Visa card, they will give you an additional two years of warranty. Four years total.

    • Wolf Richter says:

      Here’s what I don’t understand: if you don’t HAVE to have the merchandise the next day, most retailers — including Macy’s — will deliver for free to your house. It takes usually about 3-4 days. They say 5-7, but it never takes this long. So why would I waste time and money going to the store when they bring it to me for free?

      BestBuy has the same deal. Except, it takes one day longer to pick up at the store (they too get it delivered but then have to process it, apparently). But delivery to the house is free — and faster.

      • IdahoPotato says:

        I like to go to the store ‘cos there’s no minimum purchase amount and if it is damaged/not satisfactory, I can return it right away.

        Costco exec membership delivery is free? I have exec membership and had no idea. Thanks. I buy a lot of fresh and frozen fruits and veggies from Costco. Not sure if they deliver that.

      • Marcus says:

        I go to physical stores when I need to try stuff on or be measured for tailoring. Shoes, pants, dress clothes / jackets, etc. But for mostly everything else, it just doesn’t make sense.

        In contrast, my girlfriend will order five sizes of something to be delivered, then keep one (or none) and send the rest back. Lots of niche retailers offer totally free returns including free shipping. Amazon does to an extent but rumor has it they will cut you off of you return too much (I have no evidence for this). For me this seemed like a hassle, but when thinking it over, I realized that it actually takes her far less time than one trip to a retailer for me. We have a fedex/ups pickup at our work so it’s very efficient.

        • MCH says:

          Well Marcus, you obviously don’t have the right chromosomes. Because the best thing about online shopping is the ability to absolutely return every single thing. Remember it’s not just the size that matters, but matching the outfits and all the rest. Is that the right shade of Chartuse to go with this rainbow colored scarf? Can’t decide until she tries it. Those decisions are harder to make in the stores when there are time pressures, and the imbecile boyfriend is sitting there with his stupid phone and not paying attention. Oh, and the ladies don’t want to be seen in public with a mismatching set of clothes. It’d be like if you went to work only in your underware.

          Remember the entire shopping experience is not geared toward men usually, why do you think there are all of these stores for women’s clothing, is there a real reason for both a Banana Republic and an Old Navy, and whatever other brandis under that particular umbrella.

          Online shopping has been moderately useful for men, but a frigging quantum leap for women. The stores knows this, and those things that gets returned? Trust me, they get recycled into the inventory for the next gal trying to match her power pants with that crazy aqua lavenderish silk blouse and midnight black bra.

        • Petunia says:


          Boy, are you well trained. Kudos to your lovely lady.

        • MCH says:

          Yes, I am well trained, my default question is “how high.”

        • Erle says:

          @ MCH and Petunia.
          I had to laugh. My wife is a fanatic on “matching”. She figures out precisely what she is to wear the next day even if it is to do the routine childcare of the grandchildren.
          The jewelry must properly match the outfit, ad nauseum. Don’t get me wrong, I find it amusing.
          She berates me for getting slovenly about my appearance and reminds me that I used to dress properly. That is true so I suppose that I will head on over to Goodwill to find some new togs. Girls crack me up.

  6. Fred says:

    Too bad this isn’t 1999, when Macy’s would have been able to spin off as a multibillion dollar entity.

  7. HB Guy says:

    Our daily mail is usually clogged with another junk mail ad for another (endless) Macy’s sale with 20% or more off a huge number of items. This has gone on for years.

    Given the near constant discounting Macy’s engages in, is it even possible to estimate what same store sales really are? Same store, y/y item volumes or average transaction sizes are much more meaningful.

  8. Javert Chip says:

    It would surprise me if mall owners & creditors were “fooled” by the way Macys reports store sales; presumably Macys store rent is a function of the actual brick & mortar sales of each store.

  9. Bet says:

    Macy’s has been terrible for clothes shopping for the last 15 years. A total cluster muddle. I only shop there now for towels and bed linens. Was there last weekend and loaded up on the sales. Otherwise not so much
    Most department stores are terrible to shop for clothes anymore. Over priced , cheap materials and quality, plus down right ugly. Nordstroms included. The smaller stores with nice clothes, shuttered ie Cash’e
    Good thing I know how to sew and make my own clothes. But oh yeah
    From all the M&A’s for fabric stores in the U.S. the materials offered are cheap crap as well and so are the patterns. One has to go to Europe for patterns that are stylish and work out , not the flour sack ones offered here. Go USA………sigh……

    • Kaz Augustin says:

      Not so fast, Bet. I’m looking at European winter fashion for the (teenaged) kids at the moment. And. It’s. Abysmal. Doesn’t matter which store you use, they’re trying to make everyone look like effin’ peons. Spending some time in Asia, I also have the opportunity to scope Japanese, Korean and Chinese choices and they’re barely better, although there are a couple (only a couple) of standouts. Only problem is sizing. I’m a 10/12 by US standards and XL/XXL (even XXXL!) by Asian! Oh, the ego!
      Like you, I can knit and sew (meh-to-yuk on the crochet front), so it looks like I’ll also be moving back to patterns and sewing up fashionable stuff for them myself. (And don’t get me started on the slutty wear that passes for little girl “fashion”. What exactly is society trying to say here?)
      It’s a barren fashionscape out there and I doubt it’s going to improve.

    • Erle says:

      @Bet, I was in a mall for the first time in three years and I was stunned at just how ugly the womens’ clothes are now.
      Several years ago I went to the place and there was a display window with some of the most attractive outfits that I have seen since watching 1937 movies. Needless to say the place went bust and there has been nothing like it since.
      I have limited contact with business women and sales so I am a novice. You are correct that most everything is shoddy and poorly fitting.

  10. Shawn says:

    I don’t believe it’s a secret. Macy’s has aggressively closed its stores in the past and there will probably be a lot more on the way. Amazon, for it’s part is getting into the brick and mortar business by buying up Kohl’s.

  11. roddy6667 says:

    There was something here on Wolfstreet about the overbuilding of brick and mortar retail being the cause of the decline, rather than online sales. America has 4X the square footage per capita of retail shopping than Europe. Four times.
    Internet captures only a small percent of total retail sales.

    • Chim Ritchalds says:

      It’s not an either/or thing, both factors are playing their respective parts.

    • Wolf Richter says:

      Yes, overbuilding — “over-malling” — is a huge issue in the US, but it hurts the mall owners, not the retailers.

      In terms of retailers, department store sales peaked in 2001 and have plunged since. This is the business Macy’s is in.

      The quarterly e-commerce sales will be released tomorrow (?), along with other retail data, and I’ll post an update on online v. brick-and-mortar sales in the US.

    • Unamused says:

      ->There was something here on Wolfstreet about the overbuilding of brick and mortar retail being the cause of the decline

      I quite agree. The market for beds, greasy spoons, and common household stuff is finite.

      It’s another indication that supply is severely out of balance with demand, and more evidence that ‘supply-side economics’ is empirically false, quite aside from being simply unsupportable in theory.

      Worse, US retailers mostly seem to carry all the same stuff. The consumer market is limited and therefore competitive, so there’s a certain convergence towards items which sell well. There are a lot of stores but less in the way of interesting variety every year.

      That said, whats the point of having different retailers? Taken to its logical conclusion, in the future all stores will be Amazons, just like all restaurants will be Taco Hells. And that would suck.

      • Mean Chicken says:

        I don’t need to go to a store to find junk that’s overpriced, I sort through plenty of that online.

    • MC01 says:

      Roddy, I am part French and part Italian and I travel extensively (albeit not as much as I used to) and let me tell you a couple of things.

      First: most of the world is overmalled, not merely the US. South-East Asia has not merely some of the largest shopping malls in the world (look up 1 Utama as an example) but has a whole lot of them, and this is on top of the usual shops, bazaars and markets. Iran, despite all the internal issues, has some of the largest and most packed malls in the world. Those in Shiraz are beyond crazy.
      Second: I suggest you take a small road trip in Italy, in particular between Verona and Milan, to see what overmalling really means. My mother sent me an article about a new €60 million development having just been opened… in an area packed with struggling malls and surrounded by Amazon fullfilment centers. Unibail-Rodamco-Westfield is building another maxi-mall 6 miles from Milan at a cost of (Dr Evil voice) €1.4 billion. Needless to say Milan is surrounded by malls like Lille was surrounded by Vauban-designed fortifications.

      All these mall owners are throwing enormous amounts of money at a shrinking market (brick and mortar retail): we have Amazon, eBay and Etsy in Europe as well and online shopping sites such as Hallo Hallo, Lazada and MatahariMall are booming in SE Asia.
      Interest rates have already started to tick upward in most of the world: investors are waking up from the hangover and starting to demand to be compensated for the risks they are taking.

      The US Federal Reserve has been fretting about commercial real estate (CRE) for a while now, and rightly so, albeit they carry a fair share of the blame for pushing investors into it at the worst possible moment.
      I haven’t heard similar warnings from Italian, Filipino, Spanish or Malaysian monetary authorities.
      US CRE investors will suffer, make no bone about it, but those in the rest of the world are going to be literally beaten into a pulp.

  12. Gian says:

    I bought a 65” Samsung TV on line from Costco, free delivery in less than a week and I did not have to deal with manhandling the the thing into my SUV, etc…. I unboxed it and turned it on only to see that someone had apparently dropped it and it was unwatchable. So I boxed it up, manhandled it into my SUV, took it back and stood in the return line for 25 minutes. Yes, they exchanged it without question, but what a pain in the ass it was. No more electronics on line.

    • MB732 says:

      Gian we know it was you who dropped and broke the TV because we heard the crash. But we don’t care…THIS time…


  13. Pete from Toronto says:

    Wolf, you mentioned that Macy’s does not break down its total sales into bricks-and-mortar vs. online.

    If Amazon is assumed to be 100% online, then using your table above, wouldn’t Macy’s online sales in dollars be:

    (1.2%/49.1%) x Amazon reported sales?

    (We would need each company’s share-of-online sales figures and total dollar sales to be for the same reporting period.)

    • Wolf Richter says:

      Let me add some dollars here:

      According to Census data, e-commerce sales in the US are on track to exceed $500 billion in 2018.

      eMarketer estimated that Amazon’s US online sales will be $258 billion in 2018. So if that’s a share of 49%, total US e-commerce sales by this method would work out to be $526 billion in 2018. Close to the Census data.

      If Macy’s share of online sales = 1.2% of $500+ billion, it would work out to be over $6 billion in 2018. Macy’s is going to have about $25 billion in revenues in 2018; so online sales would be about 25% of total sales.

      All these are just estimates. Would be nice if Amazon, Macy’s and everyone else disclosed real numbers (Nordstrom discloses actual online sales).

      • Petunia says:


        Don’t forget the old catalogue companies which are now all considered e-commerce companies. Their numbers were probably all folded into the e-com numbers even though they still send out catalogues.

  14. Enquiring Mind says:

    Wait for Macy’s and similar retailers to trot out some variation of the Dark Box specter. That is used in property tax work to lower assessments, since a dark box doesn’t have anywhere near the economic value added of a going concern. The upshot is that hapless municipalities and such get whipsawed. They lower taxes, give incentives and then get a rude surprise when they try to recapture any of that through tax increases.

    The big box retailers work on their tax lowering best practices all over the place. They have an advantage when dealing with an isolated government (like that gazelle that gets separated from the herd by the lions) that comes across a large retailer rarely. One downside risk in muni bonds is the presence of such dark boxes that reduce future tax revenues.

    Homeowners and other consumers of municipal services may also have some disruptions or decline in services due to changes among some larger payors. Those are on the horizon in a deflationary scenario and in a brick-and-mortar versus transition to online creative destruction scenario. Broader, more stable tax bases are your friend.

  15. Matt Schilling says:

    I follow your sound logic that, if digital sales grew by double digits and overall sales only grew by a couple points, then brick and mortar sales must’ve shrunk. But did you factor in the fact that Macy’s has closed multiple stores? That would cause the Brick and Mortar portion of their total sales to shrink, even if sales at their remaining stores held steady, or even increased slightly.

    • Wolf Richter says:

      Matt Schilling,

      In terms of total sales, see my comment above.

      In terms of sales at the remaining stores: for example, Macy’s closed 2 of the 3 Macy’s stores in San Francisco. So sales at the remaining store should have soared. And same-store sales in general should have soared because this got repeated across the country.

      But it’s not happening. Macy’s doesn’t disclose “same store sales.” It only discloses “comparable sales,” which are sales at its comparable stores PLUS all digital sales. That number rose 3.1%, but this small increase was because of the surge in digital sales.

      Macy’s doesn’t want anyone to know how bad its brick-and-mortar sales actually are.

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