Macy’s (M) is expanding its beauty business with the acquisition of Bluemercury, a luxury beauty products and spa services retailer. In March 2015, the leading department store completed the acquisition for $210 million in cash.
Revenue by category
In fiscal 2014 ending January 31, 2015, Macy’s derived 38% of its revenue from feminine accessories, intimate apparel, shoes, and cosmetics. Female apparel, and men’s and children’s merchandise each accounted for 23% of the total revenue.
With improvement in economic conditions, consumers might increase their spending on discretionary (XLY) items like accessories and cosmetics. This could benefit department stores like Macy’s, Kohl’s (KSS), and JCPenney (JCP). Beauty products are a profitable business at both Macy’s and the upscale Bloomingdale’s stores.
Kohl’s is also focusing on expanding its beauty business. At the end of fiscal 2014, about half of its stores had newly renovated beauty departments. Kohl’s expects its new beauty department to be present in ~900 stores by the end of 2015. In February 2015, Kohl’s announced its partnership with Bliss, a leading spa-orientated skin care and well-being brand, which will further expand its beauty merchandise.
Macy’s Bluemercury acquisition will further strengthen its beauty product offerings. Bluemercury operates about 60 specialty stores in 18 states and an online business. Macy’s plans to further expand Bluemercury’s standalone specialty stores and grow its online capabilities. The company also plans to add selected Bluemercury boutiques and private-brand products to its department stores nationwide.