Macy's just confirmed the end of department stores as we know them

AP

Macy's is expanding its off-price concept, Backstage, to 100 additional stores this year.

• Macy's is expanding its off-price concept, Backstage, to a quarter of its stores.
• Backstage, which has been compared to TJ Maxx and Nordstrom Rack, sells Macy's brands at steeply discounted prices of up to 80% off.
• Macy's has also copied discounters by rolling out self-service models at its shoe departments.

Macy's is morphing into a discount store.

The retailer is tripling the number of stores that offer its off-price concept, Backstage, to 145 locations this year, the company said Tuesday.

Backstage, which occupies a sprawling 15,000 square feet of many Macy's stores, has been compared to successful off-price retailers like TJ Maxx and Nordstrom Rack. It sells Macy's brands at steeply discounted prices of up to 80% off.

The new expansion of Backstage will include, for the first time, some of Macy's highest-performing locations at premium malls, Macy's CEO Jeff Gennette said on a call with analysts.

"We feel good about the model we have landed on for Backstage, and in 2018 we're planning to expand to another 100, including in some of our premium malls," he said.

The company is doubling down on Backstage as it fights to maintain its new sales momentum. In the most recent quarter, the retailer's same-store sales increased 1.3% - the first quarterly uptick in three years.

According to Gennette, Backstage is driving up customers' spending and visits to Macy's stores that offer the concept.

The company started testing Backstage several years ago, first as stand-alone stores and later as sections inside of existing Macy's stores.

AP

Backstage sells Macy's brands at steeply discounted prices of up to 80% off.

The concept is meant to go after the two-thirds of Macy's customers and more than 70% of millennials who shop at off-price stores monthly, Gennette said last year.

Backstage isn't the only area where Macy's is copying discounters.

Last year, the department store chain rolled out self-service systems in its shoe departments nationwide, meaning customers now serve themselves instead of finding a salesperson to retrieve shoes. The model is similar to those employed by TJ Maxx and Nordstrom Rack.

Customer service was once what set Macy's apart from those retailers. But now many customers don't want that level of service when they're shopping, according to Karen Hoguet, Macy's chief financial officer.

"Lots just say, 'Leave me alone. Let me get the shoe I want and move on,'" Hoguet said at an investor conference last year.

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