The target strategy prevails while Macy’s spirals with the opposite plan

Target and Macy’s are seeing two-tailed results, driven by completely opposite strategies to grow their bottom line. Macy’s wants to build on its luxury market, while Target focuses on providing value.

Target’s value-focused strategy is paying off

Target was able to reverse its sales failure by focusing solely on lowering prices and providing a more efficient customer experience.

Shares of Target are up about 23.5% over the past year, buoyed by a nearly 12% gain on Wednesday. The store also posted a 40% increase in earnings per share over the previous year.

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The company’s net sales rose 2% and its revenue is 4.3% higher than last year.

In its Q2 earnings report, Target attributes its success to focusing on customer needs. The company strives to provide everyday value to its customers by reducing prices based on seasonality and improving its digital experience by simplifying the customer experience.

“Over the summer, we reduced our prices on approximately 5,000 frequently purchased items in many markets and saw an acceleration in both our unit and dollar sales trends in these businesses,” said Brian C. Cornell, president and executive director, during the summer. the Q2 earnings call.

When it comes to efficient shopping, Target has cracked the code by focusing on its digital experience, which has generated more than two-thirds of its sales thanks to the convenience of its same-day delivery services, led by Drive Up and Target Circle 360.

Target’s focus on providing personalized value to its customers increased store traffic by 3% year-over-year and more than 20% in 2019.

The company has been able to reach the consumer directly through Roundel, its advertising business integrated into Target Circle 360. Roundel gains deep customer insights by analyzing customer needs and delivering personalized offers that prioritize value.

In Q2, Target Circle 360 ​​attracted more than 2 million new members, allowing Target to offer its customers four times more offers than last year.

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But people are still spending money on things other than necessities, as shown by Target’s apparel sales, which were up 3% and beauty sales 9% over the previous year.

“In an environment where consumers continue to make significant trade-offs, our results demonstrate the power that comes from the right combination of novelty, seasonal relevance and compelling value,” Cornell said in the earnings call.

Signs that say “Sale!” are displayed in the aisles inside a Target Corp. store. on Black Friday in Dallas, Texas.

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Macy’s luxury focus produces a quarterly decline

On the other hand, Macy’s is placing all bets on its luxury brands and keeping prices high, but this strategy seems to be insufficient.

Shares of Macy’s are up just 2.5% from a year ago, but fell nearly 13% on Wednesday after its earnings release.

The company’s net sales were down 3.8%, and its revenue was down about 3.6% from a year earlier.

To accelerate the company’s growth, Macy’s plans to close about 150 underperforming Macy’s stores by 2026 and shift its focus to upscale store locations growing at about 20 percent.

While the company insists its luxury brands are performing positively, Bloomingdale’s net sales fell 0.2 percent and Bluemercury’s rose 1.7 percent compared to last year.

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During Macy’s earnings call, the company said its luxury brands are keeping customers engaged. They say they see the most positive results from higher full-price sales, private label expansion and reduced promotional discounts.

One reason Macy’s wants to prioritize its luxury retailers may be that its marketing relies heavily on brand-sponsored events such as the Macy’s Flower Show, the Macy’s Thanksgiving Day Parade and its holiday windows.

The company says it makes decisions based on what it sees in the market and allocates resources accordingly to drive business.

President and CEO Tony Spring says the luxury consumer has money to spend in their stores, but is still cautious about how they do it.

“Our challenge is to create a compelling reason for the customer to shop at Macy’s, Bloomingdale’s and Bluemercury, and we have that in our inventory,” Spring said in the earnings call.

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