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Why Now Is the Perfect Time For Macy’s to Bet On Its Backstage Off-Price Arm

Macy’s picked a good time to expand its off-price presence.

The department store chain, which announced the rollout of 37 off-price Backstage store-within-store concepts across the U.S. in March, is approaching 300 locations of the off-price brand across the U.S. These shops, which feature in-season items at marked down prices, typically occupy 11,000 to 16,000 square feet of retail space and include items across an array of categories, including apparel and footwear for men, women and kid’s as well as toys, houseware, beauty and accessories.

This weekend, the company will launch a 15,000-square-foot store Backstage shop on the eighth floor of its New York City flagship store in Herald Square, a crucial retail hub for local shoppers and tourists alike.

“This is special,” said Michael Hersh, Macy’s VP of off-price, in an interview with FN. In the Herald Square store and in other locations, the goal is for the Backstage and full-price Macy’s brands function symbiotically, with opportunities for cross-shopping among consumers who navigate both brands.

In general, the Backstage brand caters to the increasingly important value-driven consumer. This category has become more important in recent months, as consumer prices across multiple categories soar at record high levels.

“The off-price customer loves the thrill of the hunt,” Hersh said. “And they will find a way to be able to engage in that type of activity. And so to be able to offer it in one roof with Macy’s backstage, as well as the wonderful Macy’s full line assortments that we offer as well, we are able to cater to that customer.”

Given the strong state of the off-price sector in recent months, the Backstage venture is a ripe for expansion.

As consumers struggle with higher prices across multiple categories, the off-price sector is faring better than some traditional retailers. In the last few days, big-box retailers Target and Walmart reported earnings misses, largely due to a decrease in spending in discretionary categories as consumers absorbed hefty price increases across essential items like food. On the other hand, discount retailers like TJX Companies appear to be in a position to gain from value-driven consumers.

TJX Companies, parent to Marshalls, T.J. Maxx, and Home Goods reported upbeat quarterly results, with earnings of .68% ahead of estimates of 0.6%. Net sales were $11.4 billion, up 13%. However, U.S. comp store sales were flat compared to last year’s 17% increase.

Analysts from Jane Hali & Associates (JHA) LLC noted that a consumer reacting to inflation will likely benefit off-price players such as Ross Stores, Burlington Coat Factory and Rack, Nordstrom’s off price arm.

“As prices increase, off-price is positioned to benefit from inflation as consumers look for bargains,” JHA analysts said in note.

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