Abba is a famous Swedish music band that performed its last concert in 1980. In their heyday, Agnetha Fältskog, Björn Ulvaeus, Benny Andersson and Anni-Frid Lyngstad enraptured the world.
Many readers were not born then, but they may soon be dancing to its tunes. Abba is making a comeback after more than 41 years.
Fans may remember them as willowy youths swinging to the Dancing Queen. The four are now aged between 71 and 76. Their knees are rickety. Agnetha’s once-golden hair has turned grey.
Hence, it will be a comeback like no other. The four veterans will record the songs. Holograms of the group will then appear in the concerts as their 1979 selves. The virtual version (known as Abbatars) will perform in custom-made concert halls.
The concert tour will be a blend of the old and the new. The old tunes of a classic band will be revived in a technology that was undreamt of in 1979.
Abba’s comeback is taking place when a similar revival is afoot in retailing. Macy’s is a giant department chain with nearly 800 stores and US$25 billion ($33.9 billion) in sales. It traces its origins to a small store in New York in 1858. Macy’s was the pioneer of the department store. A department store is a large shop stocking many varieties of goods. Takashimaya on Orchard Road is a fine example. The store is divided into separate departments featuring shoes, perfume, clothing, etc.
Before Macy’s built out department stores in the US, retailing was divided. Shoes were bought from the cobbler. Clothing was obtained at the tailorshop. The department store brought it all under one roof. Soon, every major city had department stores. Harrod’s in London and Takashimaya in Tokyo became centres of retailing.
Macy’s grew through acquisitions. Once it had listed on the New York Stock Exchange in 1902, it used its stock to gobble up retailers in Los Angeles, Chicago and other cities.
In the last 50 years, Macy’s revenue has grown at a CAGR of 7%. This means that it has quintupled in real terms.
These figures may seem impressive, but the last decade has been hard for Macy’s. Traditional retailers have been hit by the march of Amazon. The ease of shopping online has eroded Macy’s sales growth and margins. Macy’s operating margins have fallen from 14% in 2015 to 9% in 2020. Sales growth has been flat.
Many shoppers prefer clicking on their phones to venturing out. They may try on a tie or a shoe at Macy’s. But they would buy it on Amazon.
In February 2020, Macy announced a new strategy to revive its fortunes. It is called the Polaris after the Northern Star.
Embracing the app
Macy’s assumed novel tactics like Abba’s embrace of holograms. It invested in digital growth by adopting mobile apps.
Customers can now see themselves wearing a suit on the app. An algorithm would help shoppers find the right fit and design. A fit-on would be possible. Macy’s combines the convenience of online shopping with the touch and feel of visiting a physical store.
The Polaris strategy was delayed by the pandemic. Sales collapsed in 2020.
But there is now pent-up demand for physical shopping. Americans are returning to malls in droves, as restrictions ease. The delayed consumption has created an avalanche of spending at Macy’s. The market expects Macy’s to generate sales growth of 36% in FY2022. Digital sales have been even stronger.
Tickets for Abba’s hologram concert start at just GBP21 (about $38.60). This is a sixth of the cost of an Abba concert in 1979 in real terms. Similarly, Macy’s is at a discount. At 11 times FY2022 P/E, Macy’s is at an 80% discount to Amazon. Its projected revenue growth in FY22 is better than its online rival’s.
In Singapore, there are department stores in the doldrums. The stock price and sales of FJ Benjamin have plunged with Covid. Like Macy’s, it has now adopted a digital strategy. It may rise like a phoenix when restrictions ease.
Old dogs can learn new tricks. A 163-year-old department store has mastered online retailing. The fastest-growing market for Macy’s targets teenagers. Macy’s may be inspired by the Abba lyrics, “You are the dancing queen, young and sweet, only 17”.
Nirgunan Tiruchelvam is head of consumer sector equity at Tellimer and author of Investing in the Covid Era. He does not hold any position in the stocks mentioned in these columns
Photo: Pixabay
