Macy’s kept a tight hold on inventory, which meant it avoided discounting. (Photo by Joe … [+]
There can be few retailers that are as much of an enigma as department store giant Macy’s, though investors seemed to buy into an ultimately mixed set of results.
The U.S. bellwether saw its stock value enjoy a little hop, skip and jump today as the company pointed to holiday shoppers looking for gifts and tight inventory management, which allowed it to minimize promotions and post stronger than expected results.
Yet the share price boost seems more to do with the fact that it out-performed gloomy analyst expectations than that it hit the ball out of the park.
So is Macy’s update a chink of light for the embattled group, or the calm before the storm?
Well, for its three-month period that ended Jan. 28 net income for the fourth quarter fell to $508 million from $742 million in the same period a year earlier. Revenue also fell nearly 5% from $8.67 billion a year earlier.
Comparable sales on an owned-plus-licensed basis were down 2.7% during the period from a year previous, but up 3.3% versus the fourth quarter in 2019.
So, far from terrible but equally hardly the stuff of which retail rebounds are made.
And the retailer, which includes upscale Bloomingdale’s and beauty chain Bluemercury within the group, said that it continues to plan for challenging times. Macy’s said it expects net sales to decline in the range 1-3% in the fiscal year compared with 2022, which would mean annual revenues of between $23.7 billion and $24.2 billion.
Macy’s Avoids Discounting
But what Macy’s did do far better than many of its peers was manage inventory with an iron fist, meaning that unlike rivals it didn’t have to price dump to shift unwanted stock.
That proved significant, because many U.S. retailers went into Q4 holding far too much product.
“Through the ongoing execution of our Polaris strategy, we remained agile, pivoted to meet customer demand and elevated our approach to inventory management,” Jeff Gennette, chairman and chief executive officer of Macy’s Inc. told investors of the results.
“In the fourth quarter, we benefited from our disciplined inventory approach and compelling gift-giving strategy…We were competitive but measured in our promotions, took strategic markdowns and intentionally did not chase unprofitable sales.
“As we look to 2023 and beyond, we believe our five growth vectors which include our private brands reimagination, off-mall expansion, online marketplace, luxury brands acceleration and personalized offers and communication will further solidify our modern department store positioning.”
Macy’s Enjoys Late Boost
What Macy’s results also suggest is that sales picked up in the final weeks of the quarter. In early January, the company had shared some somewhat gloomy holiday numbers and at that time had expectation-managed by admitting that sales may be “on the lighter side” of forecasts.
The company said it had noted shoppers watching their spending and said they had bought fewer items for themselves while shopping gifts in November and December. Clearly, there was a late boost, perhaps as macro-economic fears waned.
Macy’s had signalled soft Holiday sales but later weeks boosted revenue. (Photo by Stephen … [+]
And Macy’s appears to have nailed its buying, because at the end of the fourth quarter it reported its inventory was down about 3% versus a year ago and down a striking 18% compared with 2019. For the full year those figures were 4% and 15% respectively.
Even though it had to compete with rival retailer sales, that stock management largely protected margins.
Within the group Bloomingdale’s and Bluemercury brands also fared better.
Bloomingdale’s comparable sales were up 1.2% on an owned basis and up 0.6% on an owned-plus-licensed basis. Beauty, women’s and men’s apparel in both contemporary and dressy performed well, partially offset by weakness in handbags and textiles.
Bluemercury comparable sales were up 7.2% on an owned basis. Results were driven by strength in skincare and color, strategic partnerships and its new initiative The Cache, an incubator platform that curates the latest undiscovered, emerging, and cutting-edge brands, the company said.
