Macy's has a lofty goal for its private-label business. Here's why

Key Points
  • Macy's aims to grow its private-label business to represent 40 percent of total inventory.
  • As of last June, it was about 29 percent.
  • "This a hidden gem of our organization," Molly Langenstein tells CNBC.
Shoppers at Macy's flagship store in New York.
Scott Mlyn | CNBC

Macy's aims to grow its private-label and private-brands business to represent 40 percent of the retailer's overall merchandise mix, according to CEO Jeff Gennette. The lofty goal is part of Macy's overall turnaround plans, to get back to positive same-store sales.

As of last June, the amount of private and exclusive brands at Macy's was about 29 percent of total inventory. That includes some of its best-selling lines: INC and Alfani for women's and men's fashion, and the Martha Stewart collection for the home.

Then, less than a year ago, Molly Langenstein's role at Macy's shifted so that she would be able to spearhead the department store chain's bigger push of private labels. Divisions were streamlined to focus on "lifestyles," excess inventory was increasingly chopped from stores and everyone at Macy's set their eyes on a 40 percent threshold.

"I can tell you with certainty that we are moving faster," Langenstein told CNBC at the ShopTalk conference in Las Vegas. "This is a hidden gem of our organization that we should be using in a more intentional way."

Analysts and investors alike know that private-label brands can spell better profit margins for a company, if it's able to execute well on the strategy and amass a loyal following for the lines. The exclusivity factor keeps shoppers coming back for more of something they can't find elsewhere, and a company like Macy's is able to slash costs typically paid to middlemen or other outside brands.

"It is certainly part of our equation for profitability," Langenstein said. "Some of our most loyal customers [and biggest spenders] are most loyal to us because of our private brands."

Macy's is meanwhile planning an overhaul of its website, which is slated to be unveiled later this year. There will be a bigger focus on the company's private and exclusive labels, Langenstein told CNBC.

Macy's isn't alone in its private-label push. Other companies investing heavily in their own lines include Target, Walmart, Amazon and J.C. Penney.

The retail marketplace today, according to Langenstein, has become a "sea of sameness," with companies like Amazon and off-price players flooding shelves with much of the same brands. This is one of the main reasons why Macy's aims to grow its own brands, she said, to have inventory that is exclusive to the chain and different from what's already out there.

Companies like Tommy Hilfiger and DKNY, for example, have created lines exclusive to Macy's, Langenstein said, adding that shoppers should expect more capsule collections from the chain within the next few months.

"Your availability of like product is pretty widely distributed," she said about the apparel industry today. "The availability for not-like product is something we are all searching for."

Earlier in the week, Macy's also said it plans to roll out mobile checkout to all of its full-line department stores by the end of the year.