Macy’s Turnaround Takes Shape as Q4 Earnings Exceed Expectations

In Industry News, What's New by Lauren Parker, Accessories Magazine

And now for some good retail news: Macy’s has released its fourth-quarter earnings and they topped analyst projections.

Q4 2017 sales totaled $8.666 billion, a 1.8% increase (compared to $8.515 billion in the Q4 2016). Expectations were $8.68 billion.

Store comp sales on an owned basis were up 1.3% in Q4 and up 1.4% on an owned plus licensed basis. Expectations were just 0.1%.

For fiscal 2018, Macy’s is expecting year earnings to be within a range of $3.55 to $3.75 per share. The retailer is calling for same-store sales to be flat to up 1%. Total revenue is predicted between 0.5% and 2%.

“I think this is a bit of a turning point for the retail sector,” Telsey Advisory Group’s Dana Telsey told CNBC on the heels of Macy’s earnings report. “I think it’s a bigger story.”

According to Retail Dive, Macy’s CEO Jeff Gennette outlined “Growth 50,” a new plan to roll out the successful experiments from its Woodbridge Township, NJ store into 50 stores nationwide. This includes expanding Backstage and Big Ticket; more fashion and localized product; improved fixtures and facilities; expanded in-store technology, top talent, localized marketing and community engagement; and a focus on leased business like food and beverage. Backstage is planning 100 new stores, including locations in premium malls. Private-label apparel is now about 20% of the business, and Gennette said that will grow to be between 29% to 40%.

According to Retail Dive, analysts expressed confidence in Growth 50’s potential but realism in forward expectations:

“We believe Growth 50 is the laboratory which can drive the success or failure of Macy’s in the long-term because we see this as the ‘Research and Development’ program which may or may not attract younger customers,” according to a note from Cowen & Co. emailed to Retail Dive. “Macy’s needs to retain existing customers but attract new ones too and ideally lower its average and median customer age over time.”

But it’s early days, Cowen warned. “Macy’s is in early innings of an essential reinvention: proprietary product, intensification of product curation, non-tender loyalty and customer lifetime value analysis, increased speed & inventory open to buy — these are all important & integrated efforts which require ‘steroids’ to compete effectively in the battle vs. new and existing competition including Amazon.”

GlobalData Retail Managing Director Neil Saunders echoed such sentiments in an email to Retail Dive and cautioned “realism about Macy’s situation and the context of the latest numbers.” Macy’s growth of 1.3% is well below overall retail spending growth of 3.9% over the same period, he noted. “So, Macy’s has lost ground both at an overall level and, by our calculations, within a number of key categories like apparel and home,” he said. “This view is backed by our consumer data, which shows no real recovery for Macy’s in terms of shopper share or shopper opinion about its proposition.”