There’s plenty of logic to a Hudson’s Bay Co.-Macy’s Inc. deal, based on customer transaction data from the NPD Group.
“When you look at this potential deal, there is opportunity for the Hudson’s Bay group to get some of the Macy’s customers to come over into their portfolio,” Marshal Cohen, chief industry analyst for The NPD Group, told WWD. “The Hudson’s Bay Co. would not be cannibalizing their own business by buying this business.”
NPD Group’s Checkout Tracking unit examined purchase data at the receipt level to form an analysis of customer overlap. Officials at NPD indicate that while there are “obvious similarities” among the items sold at Macy’s and Hudson’s Bay’s Lord & Taylor and Saks Fifth Avenue divisions, there are also “clear differences among their customers.”
Related Articles
According to NPD officials, the data held some surprises about overlap among apparel buyers at Macy’s, Lord & Taylor and Saks. Among the key findings:
You May Also Like
- Customers who buy apparel at Macy’s tend to be a fairly loyal group. They give a full 16 percent of their apparel share of wallet to the chain.
- But those same people tend not to buy clothes at Lord & Taylor and Saks Fifth Avenue, as the data shows that Macy’s apparel buyers give just 1 percent of their apparel share of wallet to Lord & Taylor, and even less to Saks.
- Lord & Taylor apparel buyers, by contrast, are about as fond of that chain as they are of rival Macy’s. Of those shopping Lord & Taylor regularly for apparel, L&T gets an 11 percent share of wallet, but those same shoppers are providing Macy’s with a 10 percent share of their apparel wallet.
- Many Saks shoppers also head to Macy’s to supplement apparel. Regular Saks shoppers tend to spend 6 percent of their apparel wallet at Saks. But those same shoppers also spend 6 percent of their apparel wallet at Macy’s.
There are several reasons why Hudson’s Bay Co. would want to take over Macy’s, including opportunities to pick up some valuable flagship real estate and create synergies for cost savings. Yet as NPD suggests, there’s also the opportunity “for the holding company to grab back a considerable percentage of the apparel sales it loses to Macy’s.”
Talks between Hudson’s Bay and Macy’s are ongoing. If a deal is struck, the surviving company could decide to fold L&T into Macy’s or continue to operate it as a separate division. “You could argue a case for either,” said Cohen. “Lord & Taylor and Macy’s certainly could continue to operate separately on their own, but each have to have their own personalities. The key is how are going to be able to create uniqueness. In today’s environment, operating department stores is really tricky. Which department store does well? They have to change.”
Despite its recent sluggish performance, Cohen said Lord & Taylor maintains “a very loyal customer base, and strength in women’s business attire, special event dressing, dresses and appealing to mature customers, while just starting to lure younger customers, 21- to 35-year-olds, to the store. “They also do a very good job of creating exclusives with smaller boutique brands.” L&T does less with sportswear overall, has a mixed performance in men’s wear, and doesn’t do enough volume in footwear.
At Macy’s, the biggest challenge is managing a high number of locations, fighting off competition at the high and low ends of the business. However, the department store has “great consistency, the consumer knows what exactly to expect, there’s a wide gamut of customers and the company has done a good job of increasing its omnichannel presence. There is a focus on making the product available,” Cohen said, though he believes “a strong dialogue” with the customers preceding and following the transaction is lacking. He believes Macy’s is strongest in men’s, juniors, home and private label. Sportswear, overall, is said to be weak.