Macy's posts 4th straight quarter of comps growth

Dive Brief:

Macy's on Wednesday reported that third quarter net sales rose to $5.4 billion from $5.28 billion in the year-ago quarter, as net income reached $62 million, up from $30 million a year ago. E-commerce sales grew in the double digits, according to a company press release.
Store comps on an owned basis rose 3.1% and on an owned-plus-licensed basis rose 3.3%, the fourth consecutive quarter of comparable sales growth, the department store said.
The retailer raised the lower end of its guidance for the year, saying it now expects comp sales on an owned plus licensed basis to grow 2.3%-2.5% (up from its previous forecast for 2.1%-2.5%) and net sales to grow 0.3%-0.7% (up from flat to 0.7%).

Dive Insight:

The company's Macy's, Bloomingdale's and Bluemercury units all did well in the third quarter, Jeff Gennette said in a statement, with strong results both online and in stores, and the retailer is ready for the holidays.

"The holiday season is when Macy's truly shines," he said. "We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter."

The department store's revamped loyalty program and the improvements it's made to many of its stores have made a difference, according to GlobalData Retail Managing Director Neil Saunders. "Our consumer tracking data also supports the story of an ongoing recovery," he said, citing GlobalData research finding that last year, 59% of Macy's customers rated their shopping experience as good or very good, while this year that has risen to 67%. "Our data also show that for the first time in over eight years, the number of people saying they will visit Macy's to do holiday shopping has risen. Along with the good sales numbers, these pieces of evidence underline that Macy's is succeeding in creating a stronger appeal."

Both Gennette and Saunders noted that the company's next-level "Growth50" stores are particularly resonating with customers. But more stores need that treatment, Saunders said. "With the investment in this first wave of stores paying off, Macy's now has the confidence to extend expenditure into more shops as it moves into 2019," he said in comments emailed to Retail Dive. "That said, there is still a lot of work to do with physical stores. We are conscious that Macy's has a long tail of underinvested-in properties, many of which are underperforming and do not reflect the company's latest thinking. Some of these can be partially revived by incorporating the off-price Backstage concept."

Macy's appears to be more promotional of late, according to store checks by Jane Hali & Associates analysts. But the merchandise includes "good assortments from important brands such as Calvin Klein, Tommy Hilfiger, Champion and Nike to name a few," they said, in comments emailed to Retail Dive. "For the holiday season, they are extending the assortment of toys, as they try to take advantage of the new competitive landscape in the category."

The retailer's Scan & Pay app, which engages customers to use the mobile app while shopping in stores, "is excellent," according to Jane Hali. "Online the experience continues to improve, as does the content."

In fact, considering how it's doing more business online, Macy's should consider shrinking its store size and even shuttering more stores, according to Saunders. The company has already closed some 100 stores nationwide in the last couple of years as part of a correction to a massive over-expansion.