Macy’s ends year on high note

Macy's VegasUS department store Macy’s has posted positive fourth quarter earnings boosted by improvement at its bricks-and-mortar stores and online sales growth

Macy’s posted 1.8 per cent increase in sales for the fourth quarter of 2017 to $8.6 billion compared with sales of $8.515 billion in the fourth quarter of 2016. Comparable sales on an owned basis were up 1.3 percent in the fourth quarter and up 1.4 percent on an owned plus licensed basis. Total sales in the fourth quarter of 2017 reflect a 14th week of sales, whereas comparable sales are on the same 13-week basis as FY16.

Sales in FY17 totaled $24.837 billion, down 3.7 per cent from total sales of $25.7 billion in fiscal 2016.

“Macy’s, Inc. had a solid fourth quarter, including strong performance in January, and the full year exceeded our expectations for annual comparable sales and adjusted earnings per diluted share,” said Jeff Gennette, Macy’s, Inc. chairman and CEO. “We are encouraged to see a trend improvement in our brick-and-mortar business, and we had the 34th consecutive quarter of double-digit growth in our digital business.”

Gennette said the business is committed to return Macy’s to comparable sales growth in 2018 and will build on the momentum created in the fourth quarter of 2017. He added consumer spending was strong in the fourth quarter, and they were ready with improved execution and great products across all categories.

“We were disciplined with our promotional cadence and maintained a good inventory position,” Gennette said. “We head into 2018 with an improved base business, healthy inventories, a focused and engaged organisation and a clear path to return Macy’s to growth.”

In 2017, the department store chain tested  a number of merchandising and strategic initiatives as part of their North Star Strategy which contributed to their fourth quarter performance, according to 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,” he said.

According to Neil Saunders, managing director of GlobalData Retail, while these numbers do not suggest there is a miracle on the horizon for the business, they do provide a little cheer. In particular, the fact comparable sales are now positive after an extended period of decline means that Macy’s gets to end its fiscal year on a positive note.

“In our view, these results are by no means a clarion call that Macy’s is firmly back on track,” Saunders said. “This is not pessimism, but realism about Macy’s situation and the context of the latest numbers.”

Saunders said the first thing to note is that the total sales uplift of 1.8 per cent is aided by an additional week of trading.

“When this is removed, we estimate that total sales shrunk,” he said. “Admittedly, much of this relates to the prudent store closure program, but it nevertheless provides a more balanced picture of Macy’s current position.”

The comparable sales figures account for the additional week of trade, so are an accurate reflection of underlying performance. However, while they applaud the 1.3 per cent growth, Saunders said it is essential to unpick how much of this is down to Macy’s strategy and how much is attributable to the general uplift in external conditions.

“A simple way of assessing this is to look at whether Macy’s is gaining or losing market share,” he said. “Unfortunately, on this basis, Macy’s growth of 1.3 per cent is well below retail spending growth of 3.9 per cent over the same period. 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. 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.”

None of this is to suggest that Macy’s is standing still. Saunders said they know that the business has many initiatives in play, and they recognise that it is making changes.

“However, as we have noted before, that change is not yet established enough nor is it ambitious enough to drive a step up in performance.”

But Saunders believes Macy’s is in a position to create the more widespread change required in the future.


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