Turnaround plan is working at Macy's
Macy's reported its strongest quarterly results in years as efforts to overhaul assortments and launch a new loyalty program paid off.
The retailer raised its full-year profit forecast after it reported that first quarter same-store sales rose 4.2 percent.
This was the second straight quarter of same-store sales growth and the best quarter of comps in years for Macy's.
"Results for the first quarter reflect continuing momentum in the business. We exceeded our expectations and saw strong performance across all three brands—Macy’s, Bloomingdale’s, and Bluemercury—as well as across all geographic regions and families of business. We are maintaining a healthy inventory position, which helped us deliver improved gross margin,” said Jeff Gennette, Macy’s, Inc. chairman and chief executive officer. “The winning formula for Macy’s, Inc. is a healthy brick & mortar business, robust e-commerce and a great mobile experience. While we have more work to do, the continuing improvement in our stores is encouraging and we once again achieved double-digit growth in the digital business. Our best customer is responding well to the improvements we’ve made to her experience in our stores, on .com and through the Macy’s app.”
Macy’s also said it would end a joint venture agreement with Fung Retailing Ltd in China but would remain active on Alibaba’s e-commerce platform TMall as well as social media channels.
Gennette said on an earnings call the company saw double-digit growth in its digital business and continued healthy consumer spending. He also said the retailer had significant improvements in international tourism, which was up 10 percent - its best numbers since 2014.
“We have the digital growth obviously percolating and we are driving that very successfully,” Gennette said. “Brick-and-mortar needed a lot of work.”
Macy’s changed its loyalty program by opening it up to more shoppers and by offering free shipping and discounts to its highest-spending customers. Executives told investors the changes were paying off as planned, drawing more shoppers online and in stores and boosting sales overall.
Net sales in the first quarter totaled $5.541 billion at Macy's, an increase of 3.6 percent, compared with sales of $5.350 billion in the same quarter last year. Macy's net income was $139 million in the first quarter, up from $78 million last year.
The company now expects adjusted earnings per diluted share of $3.75 to $3.95 in fiscal 2018. Total sales are expected to range from a 1 percent decline to a .5 percent increase in fiscal 2018. Same sales on an owned plus licensed basis are expected to increase between 1 and 2 percent.
Macy's operates approximately 690 department stores under the nameplates Macy’s and Bloomingdale’s, and more than 160 specialty stores that include Bloomingdale’s The Outlet, Bluemercury, Macy’s Backstage and STORY. Macy’s, Inc. operates stores in 44 states, the District of Columbia, Guam and Puerto Rico, as well as macys.com, bloomingdales.com and bluemercury.com. Bloomingdale’s stores in Dubai and Kuwait are operated by Al Tayer Group LLC under license agreements.