It may be time for the brick-and-mortar retailers to try something new.
Macy's shares plunged Wednesday after the company reported disappointing earnings and guidance. On the earnings call, CEO Terry Lundgren indicated that consumers don't seem particularly interested in buying clothing right now; he also urged investors to "remember that some of our boldest and best ideas are developed during these down cycles," highlighting the stock's performance since the financial crisis.
The issue is that now, the overall economy is doing just fine. That suggests that the issues that Macy's are running into could be just that — Macy's problems.
Either way, some fresh ideas appear to be required.
"They're going back to the box and trying to figure out, 'How can we be most relevant per every square foot of this box?' " JPMorgan analyst Matt Boss said Wednesday on CNBC's "Power Lunch."
Referring to department stores in general, Boss opined that "the entire sector does need to shrink, but I don't think that the concept is irrelevant. I think it can be reinvented."
"The business is shifting, but they'll get through it," agreed Odeon Capital analyst Rick Snyder, in a Wednesday interview on "Trading Nation."
Responding to speculation that the Internet is gobbling brick and mortar's lunch — as well as its breakfast, dinner and midnight snack — Snyder held the line.
"The digital side of the equation is still a very small percentage of total sales, and particularly with apparel, people need to be in the stores. They need to have some place to look at the merchandise, to touch it, to feel it and to have that interpersonal interaction," Snyder said.
And Macy's maintains that its online and brick-and-mortar businesses help, rather than hurt, each other.
Responding to a question from Goldman analyst Stephen Grambling about whether the regions with the strongest online sales have the weakest in-store sales and vice versa, Macy's chief financial officer, Karen Hoguet, responded that "we tend to find that we do the best online where our stores are strongest. So I actually think they work together, as opposed to one cannibalizing the other.... We also know that when we close a store, macys.com does less well."
Another option that appears to be catching on is retailers monetizing their store space directly. For instance, jeweler Blue Nile had partnered with Nordstrom to display diamond rings in stores — before discontinuing that relationship and opening up its own standalone showroom in a Long Island mall.
Engagement ring company James Allen has a similar arrangement with Sears, allowing prospective fiancees to check out ring designs before pulling the trigger on jamesallen.com.
Meanwhile, Macy's host retail chains such as Finish Line and Sunglass Hut inside its stores. In fact, on the same day it released its earnings, Macy's announced an agreement with LensCrafters (owned by Luxottica Group, which also owns Sunglass Hut) to open LensCrafters locations in as many as 500 Macy's stores over the next three years.
The old concern for department stores was "showrooming," which describes the phenomenon by which a shopper would check out the goods in a store before buying them online.
Now retailers appear to be shifting from fearing showrooming to embracing it, as long, of course, as they can find a way to monetize it.
Clarification: This article has been updated to make clear that Blue Nile no longer hosts a showroom inside Nordstrom.
