How Bluemercury is saving Macy's

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How Bluemercury is saving Macy's

By Gina Acosta - 02/27/2018
Macy's posted a double-digit percentage increase in digital sales for the 34th quarter in a row.

Macy's is making significant progress on operating initiatives to improve the customer experience, and a little beauty chain called Bluemercury is a big reason why.

On Tuesday Macy's reported better than expected sales results for the fourth quarter. The sales and revenue increases are at least in part due to Macy's acquisition of Bluemercury in 2015, a move that is just now starting to pay off.  

Same store sales at Macy's increased 1.4% in the fourth quarter ended Feb. 3, reversing a string of comp declines. The company also posted a double-digit percentage increase in digital sales for the 34th quarter in a row.

Although Macy's does not divulge division-specific results, Bluemercury COO Barry Beck told Bloomberg this week that last year was the chain's "best ever" by revenue. (Retail Leader profiled Bluemercury and Beck last year.) And Macy's says it is charging full speed ahead to invest in its Bluemercury division.

“We will build on the momentum we created in the fourth quarter of 2017. We are encouraged to see a trend improvement in our brick & mortar business, and we had the 34th consecutive quarter of double-digit growth in our digital business,” said Jeff Gennette, Macy’s, Inc. chairman and chief executive officer. “Consumer spending was strong in the fourth quarter, and we were ready with improved execution and great products across all categories. We wre disciplined with our promotional cadence and maintained a good inventory position. We head into 2018 with an improved base business, healthy inventories, a focused and engaged organization and a clear path to return Macy’s to growth.”

To keep the momentum going, Macy’s says it plans to continue investing heavily in its Bluemercury division and in its off-price banner called Backstage. Macy's said it opened 36 Bluemercury stores and 30 Backstage stores last year, even as it closed 16 Macy's stores. Bluemercury is an innovative beauty retailer bought by Macy's in 2015. 

The company also plans to launch mobile checkout so that shoppers can pay via their phones. It also is launching an incentive plan for workers.

“In 2017, we tested and iterated a number of merchandising and strategic initiatives as part of our North Star Strategy. These initiatives contributed to our fourth quarter performance, and in 2018 we are ready to scale as well as test additional revenue-driving initiatives. We are also encouraged by customer response to our new Star Rewards loyalty program,” said Gennette. “On the path to growth in 2018, we will continue to improve our execution, strengthen our product offerings and make the necessary investments to be competitive with today’s demanding consumer.”

Sales in the fourth quarter at Macy's totaled $8.666 billion, an increase of 1.8%, compared with sales of $8.515 billion in the fourth quarter of 2016. 

Sales in fiscal 2017 totaled $24.837 billion, down 3.7% from total sales of $25.778 billion in fiscal 2016.  Same store sales on an owned plus licensed basis declined by 1.9% in fiscal 2017.

Fourth quarter 2017 earnings per diluted share were $4.31 compared to $1.54 per share in the fourth quarter of 2016. Fiscal 2017 earnings per diluted share were $5.04 compared to $1.99 per share in fiscal 2016.

In the fourth quarter of 2017, the company opened two new freestanding Bluemercury beauty specialty stores for a total of 137 stores.

In fiscal 2017, the company's asset sales totaled $411 million in cash proceeds. These sales included stores as well as non-store real estate such as warehouses, outparcels and parking garages. Over the last three fiscal years, Macy's, Inc. has completed transactions totaling approximately $1.3 billion in cash proceeds.

Heading into fiscal 2018, Macy's says it will continue to opportunistically evaluate its real estate portfolio to identify opportunities where the redevelopment value of its real estate exceeds that of non-strategic operating locations. The company also continues to focus on creating additional value from its flagship stores while adding vitality to the retail experience.

For fiscal 2018, the company expects comparable sales on both an owned and an owned plus licensed basis to be flat to up 1 percent. Total sales are expected to be down between 0.5 percent and 2 percent in fiscal 2018. Adjusted earnings per diluted share of $3.55 to $3.75 are expected in fiscal 2018, excluding anticipated settlement charges related to the company’s defined benefit plans.

Macy’s, Inc. operates more than 690 department stores under the banners Macy’s and Bloomingdale’s, and approximately 160 specialty stores that include Bloomingdale’s The Outlet, Bluemercury and Macy’s Backstage. 

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