Macy's (NYSE:M) announced over the weekend that it was giving away $10 cash gift cards to the first 250 customers at more than 600 of its stores across the country on Dec. 20, Dec. 21, and Dec. 22. The special offer was available on a first-come, first-served basis, beginning at store opening and could be used by customers immediately.
Does it matter?
The department store chain has been struggling to grow sales this year. Revenues fell more than 5% to $5.9 billion in the third quarter as comparable-store sales declined 3.6%, and inventories piled up, resulting in the retailer running fire sales to get rid of it. Macy's CFO said last month, "We will need to liquidate this inventory in the fourth quarter so that we can maintain the flow of fresh, new merchandise."
Apparently it is paying customers to accomplish that. Industry site FierceRetail notes in an article about this Macy's move that giving customers gift cards is a time-honored tradition because it entices customers to return to do more shopping after the holidays. Some, like Target (NYSE:TGT), however, take the route of discounting the cost of their gift cards. It gave customers 10% off of its gift cards for just one day this week. Kohl's (NYSE:KSS) took a different route to entice shoppers. It gave away two free tickets to the new Star Wars: The Force Awakens movie (or any movie of the shoppe's choice) to the first 100 shoppers at its stores on Black Friday.
What makes Macy's offer different is that customers could use those cash cards the very same day they got them.
Considering the hard time Macy's has had getting customers into its stores this year, the lure of a free $10 gift card might attract a few extra shoppers, and even have them spend it immediately. That may give the retailer a quick jolt in sales, particularly if they buy other items at the same time, but it indicates Macy's is experiencing serious problems and having to underwrite its own sales growth means investors should be very leery about its performance this quarter.