By Katherine Masters and Doyinsola Oladipo
NEW YORK (Reuters) -Macy's is the latest major retail chain to disclose that significantly fewer overseas tourists in the United States are hurting overall sales.
International visitors now account for less than 2% of Macy’s sales, compared to 3%-4% prior to the COVID-19 pandemic, CEO Jeff Gennette told investors on Tuesday during a post-earnings conference call. Macy's (NYSE:M) net sales in the quarter were $5 billion, down 8% compared to the same period last year.
Macy’s is among the retailers that have spent big on flagship locations in a bid to attract high-spending visitors. The company in 2021 announced that it would invest $235 million in its Herald Square flagship, including improvements to nearby subway station entrances and an expanded pedestrian plaza.
Luxury behemoth LVMH also invested heavily in its recently reopened Tiffany & Co (NYSE:TIF). flagship store on the corner of Fifth Avenue and East 57th Street, although the company declined to disclose how much it spent on the renovation. The store accounted for 10% of Tiffany's global sales before it closed for construction in 2019.
Tourism in the United States is still lagging pre-pandemic levels.
According to the U.S. Travel Association, overseas visits dropped slightly in June to 2.6 million and remained 27% below 2019 levels. Travel to New York City was also lower in 2022 compared to 2019, although visits are forecast to reach 63.3 million in 2023 and surpass pre-pandemic levels by 2024, according to the New York City Tourism and Conventions bureau.
Tourist visits to New York from Western European countries including France and the United Kingdom have significantly rebounded as of 2022, as have visits from Canada, the organization reported in March. Chinese tourists, key drivers of luxury purchasing, are returning at a slower pace than other visitors.
While overall global travel has rebounded in a big way since the end of COVID-19 restrictions, travelers are not spending as much on goods and instead are splurging on sporting events or concert tickets in new destinations.
Tourist spending on experiences like restaurants, amusement parks and nightclubs globally was up 65% in March 2023, the most recent month for which data is available, from March 2019, before the pandemic, according to Mastercard (NYSE:MA)'s Travel Industry Trends 2023 report. But spending by travelers on goods like cosmetics, jewelry and electronics is up just 12%, the report said.