Macy’s reported its first quarterly profit in a year on Tuesday as its efforts to reduce inventory levels during the holidays and rely less on deep discounts are paying off.
The company expects 2021 to be a year of recovery and rebuilding as it claws back from the losses it suffered during the pandemic. It offered a prospect of persistent pandemic-related obstacles in the spring, with momentum escalating in the latter half of 2021.
Like many retailers, Macy’s has been injured as shoppers who work from home and attend fewer social events make fewer trips to the mall and buy fewer clothes during the health crisis.
Macy’s shares gained around 1% in premarket trading.
Here’s how the company performed in the fourth quarter ended January 30th, compared to analyst expectations based on a survey by Refinitiv:
- Earnings per share: 80 cents, adjusted compared to 12 cents expected
- Revenue: $ 6.78 billion versus $ 6.5 billion expected
Net income fell from $ 340 million, or $ 1.09 per share last year, to $ 160 million, or 50 cents per share. With no one-off costs, the company earned 80 cents per share, better than the 12 cents expected by analysts.
Revenue declined from $ 8.34 billion last year to $ 6.78 billion, up on the $ 6.5 billion analyst forecast.
According to Macy’s, sales in the same store, based on proprietary and licensed products, were down 17.1% from 2019. Analysts called for a decline of 21.3% according to Refinitiv data.
CEO Jeff Gennette said the company saw its greatest strength in the home, beauty, jewelry, and timepiece sectors during the quarter, as consumers move a greater proportion of their spending away from clothes and shoes and more toward accessories and items to their homes to embellish.
E-commerce sales increased 21% during the reporting period. The company said digital sales accounted for 44% of net sales, while roughly a quarter of Macy’s digital sales for the quarter came from in-store locations.
The company said it gained nearly 7 million new customers in the fourth quarter, many of them under 40 and shopping online, not in stores.
Analysts attributed the better-than-expected results in part to an increase in Americans’ spending on their stimulus checks.
But even as Macy’s is on the recovery path, its results lag well behind those in retail, especially those less reliant on apparel sales, said Neil Saunders, managing director of GlobalData Retail.
“Given Macy’s focus on clothing, his long-term development does not look promising if this part of his business does not work properly,” he said.
Macy’s expects annual online sales to exceed $ 10 billion in three years as the department store operator expects customer preference for online purchases to persist beyond the pandemic. The online business should become even more profitable.
Macy’s is in the process of trimming its real estate to keep better-functioning stores open in America’s top malls. In 2019, the company announced that it would close 125 locations by 2023. Earlier this year, as part of its three-year shutdown plan, Macy’s released the locations of more than 40 stores, which are expected to close by mid-2021.
At the end of the last quarter, Macy’s operated 512 of its eponymous department stores as well as 53 Bloomingdale stores and 162 Bluemercury locations.
Looking ahead to fiscal 2021, Macy’s claims sales between $ 19.75 billion and $ 20.75 billion. Analysts had asked for annual sales of 20.13 billion US dollars.
The adjusted earnings per share are expected to be between 40 and 90 cents. Analysts had forecast adjusted earnings of 77 cents per share.
Read the full Macy’s press release and materials here.