Macy's CEO says customer demand is surging in a single section of its store — and it reveals how the pandemic is shaping shopper behavior

• Macy's CEO said that since reopening its stores after the lockdown, it has seen sales at its off-price concept, Macy's Backstage, outperform the rest of the store.
• Macy's Backstage was already an area of growth for the company and could be well-positioned to benefit in a post-COVID world.
• Off-price retailers have historically benefited from periods of economic uncertainty when customers are looking to stretch their dollars as far as possible.

As Macy's stores slowly reopen across the US, shoppers are making a beeline for one area of the store in particular, according to its CEO.

In a conversation with Cowen retail analyst Oliver Chen, CEO Jeff Gennette said Tuesday that in the past few weeks as stores have reopened as lockdown restrictions ease, it has seen sales at its off-price concept, Macy's Backstage, outperform than the rest of the store, indicating that consumers are seeking value over anything else at the moment.

Macy's operates both standalone Backstage stores as well as Backstage store-within-stores at its full-line locations. The Backstage concept has a separate buying team and sells a mix of products from new and existing vendors, both from the current and the last season. It also sells overstock from its other full-price stores, though according to a spokesperson this makes up a limited amount of its inventory.

In the past few years, Backstage has become one of the brightest spots in its business and a targeted area for growth. In February, Macy's said it planned to open 50 Backstage stores within existing Macy's locations and seven standalone locations in 2020.

Experts say off-price stores, in general, are well-positioned to benefit from the pandemic. There are two key reasons for this. Firstly, the off-price model has historically benefited from periods of economic uncertainty when customers are looking to stretch their dollars.

"Money will be tight for many people and, although everyone likes a bargain now with nearly 40 million people out of work, bargains will be a necessity for many Americans," Art Suriano, CEO of management consultancy firm The TSi Company, said in a comment on RetailWire's site.

Secondly, the lockdown period has provided the off-price channel with prime buying opportunities as retailers that have had stores closed for weeks on end look to shift old inventory.

TJX Companies' (owner of TJ Maxx and Marshalls among other off-price chains) CEO Ernie Herrman addressed this in a recent earnings call. He said that the company was "seeing plentiful off-price buying opportunities" and that it gives the team "confidence in having excellent brands and quality merchandise available to us."

When TJ Maxx reopened stores in May, photos shared widely online showed long lines forming outside stores as shoppers flocked in droves. Hermann said the company was encouraged by the "very strong sales."

"We believe this very strong start speaks to our compelling value proposition and the appeal of our treasure-hunt shopping experience, as well as pent-up demand," he said.