Commerce landscapes shift all the time. One theme keeps showing up now. It’s the middle ground disappearing. Some call this the collapse of the unremarkable middle. Businesses face challenges here. Retail feels this strongly now. It means you’re not super cheap or really special. That spot seems less safe today.
Department stores show this problem clearly. Think about Macy’s, for one example. Wall Street seemed quite happy recently. This was after their earnings report came out. The stock price went up well. They beat what was expected. Also, they did not cut their money forecast. Other stores had to do that thing. Investors felt confident, it seemed.
But looking close tells a different tale. The raw numbers are not so great. It doesn’t quite match the happy market mood. Sales were $5.2 billion last quarter. This sounds like big money, right? Yet sales fell 3.9% from last year. Go back before recent problems started. Sales were only up 1.1% versus 2019’s third quarter. This shows little real growth for Macy’s.
Comparing to 2019 is important. It shows the Polaris strategy effect. Macy’s CEO said this plan is working. He said this in their press release. But sales barely grew across three years. This raises questions about that strategy. Is it really driving big changes now? It feels like running just to stand still. That is far from strong growth that lasts.
Profits look even worse for them. Net income and EBITDA both dropped loads. Earnings per share also saw decreases. Compare these to the year before now. Look at the first 39 weeks overall. Macy’s net income was 4.1 percent. Dillard’s has a similar customer idea. Their net income was 12.7 percent then. This was in the same timeframe of course.
Such a big profit gap stands out. Two like companies but different results. Dillard’s saw sales increase 8 percent. That shows healthier performance store level. Dillard’s is a much smaller store chain. Still their market value is near Macy’s value. Investors may see more potential there. That is even with being smaller.
Analysts note Macy’s handle inventory well. They are disciplined in that one area. Compared to some others this is true. Other stores had too much stuff. Macy’s did better on that side. Kohl’s had a bad quarter they shared. Target is a different kind of store. But they got lots of market share. Target had inventory issues too. Macy’s just held its spot roughly.
This lack of forward movement worries people. Competitors closed hundreds of stores nearby. You’d think Macy’s would gain customers. This seems like a chance they missed. They failed to really grow from this. It shows their core store offer lacks pull. Displaced shoppers did not come over much.
This situation is not really new history. Macy’s made big claims before this time. They talked strategies and innovation often. It often led to very little gain. Old plans had names like omni-channel thing. My Macy’s plan was about local stock. Those ideas happened over fourteen years. But sales did not change much because them. Leaders now try new concepts out. Backstage stores are off the mall now. Market by Macy’s name is confusing slightly. Toys R Us shops went inside Macy’s stores. Story bought was set to fail seems. Rewards program got updates too again.
All these changes keep happening. But the main issue is still here. Macy’s sales are lower than ten years ago. This long slow fall tells a story. It shows deep problems at this store. Other middle stores may face this too now. Their plans didn’t bring lasting growth. They lack a strong competitive spot still.
Words spoken don’t match results seen. The CEO says his team works well. He mentions retail is about details too. But stores show problems that are documented. Visits by people confirm these issues. My own trips to Macy’s show this point. The store experience isn’t good enough. They are not meeting standards for real competition.
The core problem is a weak change effort. They try to be slightly less mediocre. That’s not a winning strategy right now. The market wants stores to stand out. You need a clear reason to visit. Either be super cheap or super good. Being in the middle doesn’t work well. This struggle links to city problems too.
Cities also lose their middle area. New York transforms into something else. It’s becoming a place for rich and poor. The special parts seem to fade away. Things like weirdness and opportunity vanish. The city feels less exciting now, sadly.
It is in danger of being unremarkable. Like a giant neighborhood with gates. Maybe some generic shops pop up then. This change didn’t happen in a day. It has spread like a sickness for ages now. This isn’t just New York’s issue alone. Every rich city sees this problem now. San Francisco loses its varied crowd. Tech people change that city a lot. Boston was full of unique corners. Now it looks like long, modern walls. Washington, D.C., smoothed out its real parts. It changed for a different type of person.
These city changes link to bigger issues. Fixing cities made them kind of empty. They feel like fake versions of before. This might be from bad political plans. Development projects are often exclusive. They hurt more than they help communities. This city crisis is tied to money. It reflects a wider problem today. Many feel systems are out of control now. We cannot change them, it seems like.
New York might be richer overall. It could be healthier and safer now. Maybe it’s cleaner and runs better too. But serious social problems stay put. Homeless numbers are still high. The Bronx is the poorest urban county place. Many people live below the poverty line there. Opioid crisis ads are on bus stops. Average people work harder than before. They get less for their efforts, it seems.
Money problems hit many people hard. The poverty rate was 19.5% in 2016. Nearly one in five lived poor then. Near poverty includes more families. That’s almost half the city population. They live on the edge always. One paycheck gone could be a disaster. Poverty was lower in the 1970s. Even the lowest points were below today’s levels.
Housing costs cause the most trouble now. Rent is too damn high in New York. This is a common thing people say now. The rule says to spend 25% of your income on rent. New York families spend one-third or more. Three in ten pay half their money for rent. The situation worsens very quickly, it does. The apartment price asked rose 30%. That was from 2014 to 2017. Income only went up 10 percent for renters. That was 2013 through 2016 here. Lower-paid workers feel this the worst. Their rents climbed up fastest of all.
Homelessness rose because of this cost. Levels unseen in decades are here now. City shelters house sixty thousand people on average. Most of them are families with kids too. A third of families have a working adult. They are not mostly homeless by choice. They were priced out of the market. No price limit seems to exist now. They are victims of modern New York. Buildings that held families got torn down. Or they became condos or co-ops. Owning a place costs huge amounts. The average Manhattan condo is over $2 million. Townhouses hit a $6.28 million price.
Some think rent laws make the crisis worse. They argue regulations stop building. New buildings lack rent control rules. They are not subject to it ever. Tens of thousands were built in recent decades past. Construction keeps happening fast still. New towers rise taller than before. Policies help build things all the time. They even give money for it now. But city housing becomes less cheap. This seems very strange, actually.
Nearly half of New York homes have rent control. That’s 966,000 units roughly. About 2.5 million people live there. Tenants cannot be forced out easily. Rent hikes are limited by a board group. But rents still go up over time, you see. Rent on a stabilized place has tripled since 1980. Apartments can lose this status too. If rent hits $2,700 when empty, this happens. Our income hits $200,000 for two years. This rule caused many units to be lost. At least 139,000 lost their status. This was between the 2006 and 2016 time periods.
Ownership is also changing hands now. Owners are less likely to be long-term people. Not families needing steady rent cash. It is more global finance firms buying. They want tenants out for big returns. This puts more pressure on people living there. It adds to housing costs and problems. The link between retail and cities is clear. The middle ground vanishes everywhere. Cities lose unique spots and businesses. This hurts stores that are not luxury. Customers either are struggling hard. Or they spend on high-end or discounts. This city shift is a tough backdrop. It makes the retail middle struggle harder.
Watching the retail middle disappear means more than just stores closing. Look closer at big changes shaping our towns and money matters. When the average stores struggle, the city’s middle ground struggles also. It seems only the ends of wealth do well now. New York, a city folks watch, really shows this urban change.
I have seen New York City boom and bust for years. But this city change feels different than past times. The city is changing just for the really rich and people scraping by. New York City had unique things once, but it is losing them now. Its distinct feeling, chances, and strong energy seem less now.
Some people think the city might turn plain and boring. Maybe just same-looking shops will be all over. This shift didn’t happen fast; it came slowly over time. It feels like a sickness spreading slowly across the place. Other rich cities across America see changes similar to this.
The middle class vanishing from cities copies the middle retail collapse. As cities become just for the rich and poor, middle stores lose customers. Rich people like fancy stores or shop online a lot. Poor people need cheap things or just very basic items.
This city change makes things hard for stores in the middle. Doing well, need to understand these big changes going on here. It’s not just store plans, but how businesses work in changed cities. The middle-class shopper is a less strong force nowadays. Finding a path for stores or cities means facing complex issues. You must understand how the rich/poor gap hurts middle-market viability.
Just small changes to models will not fix this big issue. The deep housing problems, poverty, and city changes show a hard picture. The switch in who owns buildings also makes the picture starker. Businesses, like stores, must admit this reality and change things. The ‘unremarkable middle’ is not a sure base anymore now. Giving a clear fix plan is hard; experts struggle. But seeing how store problems and city divide connect is the first step. This link is the essential first step for finding a way through this.
Related posts:
Despite Wall Street’s Ebullience, Macy’s Turnaround Strategy Continues To Go Nowhere.
The Death of a Once Great City, by Kevin Baker
The Last Word: Retail Expert Steve Dennis On the AI-Led Demise of ‘Mediocre Middle’
