Summary:
- Macy's witnesses a drop in overseas customer sales from 4% before the pandemic to less than 2% of total sales.
- Quarterly earnings report shows Macy's QoQ earnings decline by 8%, amounting to $5 billion.
- US Travel Association data reveals tourist arrivals in June were over 25% lower compared to 2019.
- Mastercard data indicates a 66% increase in spending on restaurants, theme parks, and nightclubs in March.
- Macy's and competitors grapple with the impact of reduced tourist spending and a shift towards experiential expenditures.
A decline in tourist visits to the US has hit Macy's bottom line, causing a drop in overseas customer sales from 4% before the global health crisis to less than 2% currently.
Macy's, a prominent US retailer, announced on Tuesday that the absence of tourists in the country has significantly impacted its sales figures. The company revealed that its international customer base now contributes to less than 2% of its total sales, a stark decrease from the 4% figure observed before the onset of the global health crisis. This revelation coincided with Macy's release of its quarterly earnings report, which indicated a decline of 8%—amounting to $5 billion—compared to the same period in the previous year.
The situation at Macy's echoes similar concerns voiced by various US retail chains, all grappling with the ongoing challenges in the tourism sector. Visitor numbers to the United States remain notably lower than pre-crisis levels, with data from the US Travel Association indicating a more than 25% decline in tourist arrivals for the month of June, compared to figures from 2019. Additional data highlights a shift in spending patterns among travelers, who are now allocating less towards retail products and instead allocating funds towards attending sporting events and music concerts.
Mastercard's recent data reveals an intriguing trend in spending habits. March showed a remarkable 66% surge in spending at restaurants, theme parks, and nightclubs. This data provides insight into changing consumer preferences, favoring experiences over material goods. The repercussions of these trends are being acutely felt by Macy's, which had heavily invested in high-profile locations to attract affluent tourists. One notable example is the $235 million investment in enhancing its prime Herald Square store located in Manhattan. However, Macy's is not alone in facing this predicament, as even luxury giant LVMH allocated significant resources to elevate its flagship Tiffany store in New York.
The confluence of reduced tourist footfall and evolving consumer spending patterns has cast a shadow over Macy's and other US retailers heavily reliant on international visitors. The industry's ability to recover hinges on the revival of tourism and the adaptation of retail strategies to suit changing preferences.