Macy's says more people are spending would-be travel dollars on luxury items to treat themselves

• Macy's executives said the department store is poised to benefit as consumers spend more money on luxury goods instead of experiences.
• "We believe the shift away from experiential gifting provides an upside for us," CEO Jeff Gennette said during an earnings call Wednesday morning.
• Fine jewelry performed especially well at both Macy's and Bloomingdale's in the most recent quarter. Home furnishings and fragrances were also top categories at Macy's.

Macy's thinks it's poised to make the most out of a changing consumer landscape.

During its earnings call on Wednesday morning, executives commented on the recent shift away from spending on experiences and towards purchases of goods — especially luxury goods.

The retailer said that home furnishings and textiles, fragrances, active wear, and sleepwear performed especially well at Macy's in the most recent quarter. At Bloomingdale's, handbags and women's shoes were top performers. Fine jewelry was a strong category at both stores. Executives said they were surprised by how well the luxury category did.

As Americans largely continue to stay home because of the coronavirus pandemic, money that may have previously been allocated towards travel, dining, and entertainment could be shifting elsewhere.

CEO Jeff Gennette said the apparent shift in spending habits will be especially beneficial once the holiday season arrives. Like many others in the industry, Macy's will be starting its holiday promotions earlier than ever before.

"America comes to Macy's and Bloomingdale's for gifting. We had a successful gifting strategy for holiday in 2019, and we're building on that for 2020 and believe the shift away from experiential gifting provides an upside for us," Gennette said.

In an interview with CNBC, Gennette more pointedly explained how fallout from department store bankruptcies could lead to a big opportunity for Macy's when it comes to luxury.

"Look at luxury right now, look at Neiman's, look at parts of Lord & Taylor," he said. "There is opportunity for us. Nordstrom is closing stores."

Neiman Marcus and Lord & Taylor have both filed for Chapter 11 bankruptcy amid the pandemic. Lord & Taylor is in the process of liquidating its stores. Neiman Marcus is closing five department stores and 17 of its off-price Last Call stores. Nordstrom is also closing 16 full-line department stores and all three of its Jeffrey boutique stores.

But Gennette told CNBC this all could be a positive for Macy's in the end.

"Customers have got time on their hands. They can't travel. They were budgeting for travel, and they want to reward themselves," he said.

The move away from experiential spending marks a shift from a trend that has dominated discussions about retail's future in recent years.

In 2018, Macy's acquired the experiential retail company Story, which creates highly curated shops inside stores. When Nordstrom opened its New York flagship store in 2019, it came complete with a host of dining options and a Coach customization shop.

But, the pandemic has changed things for many would-be shoppers. Many don't plan to return to malls anytime soon.

"Everyone was looking to create the most positively experiential retail format," Simeon Siegel, managing director at BMO Capital Markets, told Business Insider in August. "As of today, experiences in stores are exactly what people are afraid of."

Macy's reported that comparable sales were down 35.1% in the most recent quarter, though digital sales grew 53% year-over-year.