Retail took a nosedive in 2009, as consumers spent less and focused on the basics. Surveying this grim environment at the time,  an analyst at GLG Research predicted that relatively upscale Macy's (NYSE: M) would suffer against midrange competitors such as Kohl's (NYSE: KSS) or J.C. Penney (NYSE: JCP). But the company's future may prove considerably brighter than its last few years.

That was 2009, but this is 2011
In terms of year-over-year same-store sales, the recession proved rough for all these retailers:


YoY Sales Growth 2009

YoY Sales Growth 2010

Macy's (5.3%) 4.6%
Kohl's 0.4% 4.4%
J.C. Penney (6.3%) 2.5%
Target (NYSE: TGT) (2.5%) 2.1%

Source: Capital IQ, a division of Standard & Poor's.

Only Kohl's posted positive sales growth for 2009, with J.C. Penney taking a surprisingly big hit. But though it suffered in 2009, Macy's perked up nicely in 2010 relative to these peers.

The recession helped Macy's refocus its strategy. The company's 2010 fourth-quarter report noted that management was "in the early phases of several key strategies" that are leading a growth in sales and changing the company’s shape for the year ahead.

Here's why we should be watching Macy's now.

  1. "Magic" selling. For 2011, Macy's is focused on sales, sales, sales. While 2010 ended strong, the company's annual report credited exclusive sales training and customer-driven merchandising for that rebound. As those practices persist, Macy's same-store sales have continued to climb, with an increase of 5.8% for February, 0.9% for March, and a full 10.8% for April 2011.
  2. The "omnichannel" strategy. Besides being a mouthful to say, "omnichannel" is the core of Macy's various key strategies. Macy's annual report calls it "the blurring line between our stores, the Internet, and mobile technology." The company wants to drive consumers, whether online or in person, into a relationship with Macy's and the brands it offers. And, yep, there will soon be an app for that.
  3. A market on branding. Irwin Simon, CEO of Forbes, once said, "People will always pay for brands." As someone living with two teenage girls, I can personally attest to this. While discounters offer midrange brands such as Levi's, Macy's exclusive deals with products from Kenneth Cole Reaction and Material Girl put the department store in a more elite market. Such exclusive brands and limited labels constituted at least 43% of sales for Macy's in 2010.

Foolish bottom line
Macy's is clearly sharpening its competitive edge. If the crucial strategies outlined by the company continue to produce great sales results, it will start competing less with Wal-Mart, and more with Saks.

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