Macy’s Snaps Losing Streak with First Sales Increase in 3 Years
At long last, Macy’s (M) is on the upswing again.
The department store chain said on Tuesday that comparable sales rose 1.3% in the holiday quarter that ended on Feb. 1, their first quarterly increase by that metric since the end of 2014 and well above analysts’ forecasts. What’s more, both sales and profit exceeded what Wall Street analysts had been expecting of Macy’s. And the company, after 11 quarters of declines, saw enough encouraging signs during the holidays that its turnaround efforts are working to forecast comparable sales will increase for the full fiscal year in 2018.
“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,” CEO Jeff Gennette said in prepared remarks.
Shares rose 10% in premarket trading.
While Macy’s rode the strong consumer spending wave that helped retail spending soar during the holidays, the season brought the first signs that Gennette’s efforts to turn what is the largest U.S. department store operator around, as detailed in a recent Fortune feature, may be working. His plan has included de-emphasizing discounting with subtler messaging and better product presentation, ramping up exclusive products and bolstering e-commerce with services like faster delivery.
Macy’s has been trying to win back shoppers who have defected to rivals ranging from Ulta Beauty to T.J. Maxx to Amazon.com. On Tuesday, Macy’s announced a new initiative called “Growth50” that lays out Gennette’s strategy to improve business at Macy’s 600 or so stores.
The initiative takes ongoing tests Macy’s has been conducting at its “petri dish” of a store in Woodbridge, N.J. — such as mobile checkout in store and new lighting to make shopping more inviting to 50 stores this year — as a launching pad for a series of initiatives it can roll out to a much greater number of stores in 2019.
Macy’s is also introducing an incentive plan for store workers as part of its 2018 plan. The idea is to improve business and shopper traffic at its stores even as Macy’s e-commerce continues to thrive. (Digital sales rose by at least 10% for the 34th straight quarter).
Comparable sales exclude business from newly opened or closed stores, so it’s clear Macy’s has gotten a lift from closing 100 stores or so in the last year, many of them underperforming stores at dismal malls where shopper traffic has been dwindling. Sales in fiscal 2017 totaled $24.8 billion, down 3.7% from fiscal 2016, in part because of those closings. Earnings per share on an adjusted bases during the fourth quarter were $2.82, well above the $2.71Wall Street expected.