Macy’s returns to prepandemic sales levels and faces a new challenge: inflation

Macy’s, the owner of the Bloomingdale’s and Bluemercury chains, saw its overall sales last year recover to prepandemic levels. But the retailer’s top executive said he expected a “transitional” year ahead because of the pandemic and high inflation.

Macy’s said on an earnings call on Tuesday that while inflation might “erode consumer discretionary income,” it had a number of strategies to manage the pressure. It’s aiming to reduce its costs by sourcing from more countries and buying less inventory. It’s also using customer data to figure out the optimal opening price points on everything from shirts to sofas, personalizing offers through its loyalty program and deploying deeper markdowns at individual stores based on how products are performing there. (Normally, markdowns would take place at a regional level.)

“The big difference at Macy’s now versus previous times we dealt with inflation is we have this data analytics and pricing science at a much more granular level that is helping us make the right choices,” Jeff Gennette, the chief executive, said in an interview.

Macy’s performance in 2021 signals the revival of a leaner and more digitally driven retail sector in the United States, and the company stands to benefit this year from increasing demand if more people resume social events and return to work.

Overall sales last year were $24.5 billion, with a net profit of $1.4 billion, compared with 2019 sales of $24.6 billion and a net profit of $564 million. Revenue had plummeted to $17.4 billion in 2020. Macy’s posted a net loss of $3.9 billion that year, with most consumers isolated, holiday plans canceled and tourism all but nonexistent.

The company’s latest fourth-quarter sales — which include the all-important holiday season — exceeded those in 2019, despite the Omicron wave of the coronavirus.

Mr. Gennette said that in New York City, where Macy’s is based, the company is anticipating international tourism to return in 2023, and that its flagship Bloomingdale’s location had already seen an uptick. International sales make up about 3 percent to 4 percent of the business at Bloomingdale’s and Macy’s. About half that business returned in 2021, largely because of e-commerce.

Macy’s is developing a plan for its office workers to return in a hybrid fashion, and it hopes more shoppers will come back to its stores. Mr. Gennette said he “applauded” Mayor Eric Adams’s efforts to focus on safety in New York. Macy’s, he said, has been working with Breaking Ground, a nonprofit affordable-housing organization, to help with outreach and service referrals for homeless adults in the Herald Square area, where the retailer’s headquarters and flagship store are.

“I appreciate what the mayor is doing around Herald Square and what he’s doing with Penn Station, and you see that playing out across other major cities across the nation where you have similar mayors taking an active approach to making sure that’s safe for colleagues and customers,” Mr. Gennette said.

He added that while the Omicron wave had pushed back a reopening of offices in the city, “it’s starting to loosen up again, and so I do expect you’re going to see more and more people in offices.”