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Dive Brief:
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Macy’s Q3 net sales fell 7.1% year over year to $4.9 billion, as comps (including licensed sales) fell 6.3%. Brick-and-mortar and digital sales each dropped 7%. Net income plummeted 60.2% to $43 million.
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Other revenue fell 24.9% to $178 million, and was 3.7% of net sales, down from 4.5% last year, largely due to higher store credit card delinquencies and bad debt levels. Merchandise margin expanded 110 basis points, thanks to lower permanent markdowns at Macy’s and lower freight expense.
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By banner, namesake comps fell 6.7%, Bloomingdale’s fell 4.4% and Bluemercury rose 2.5%. Macy’s and Bloomingdale’s off-price stores outperformed the full-line business, executives said on a conference call Thursday.
Dive Insight:
The contrasting performances between the full-line and off-price businesses at Macy’s and Bloomingdale’s are just another indication that consumers are taking their hunt for good deals into the holiday season.
Executives expressed confidence that the company’s range of merchandise and nameplates will accommodate consumer needs and expectations. This year, extra selling days in the fourth quarter will help as well, incoming Macy’s Inc. CEO Tony Spring told analysts on a Thursday morning conference call.
“The benefit of being a department store, again, is that we can handle the range of these cycles. I'm 36 years into this and I haven't known a fourth quarter that isn't competitive and isn't promotional,” he said.
The company’s grip on expenses helped in the period, with $48 million less in selling, general and administrative expenses compared to last year, according to Adrian Mitchell, who is chief financial officer and chief operating officer. Shares rose Thursday morning, as Q3’s sales and profit hits were less severe than many had feared, especially given the economic forces that are beyond Macy’s control.
Macy’s likely lost more market share in the quarter, however, according to GlobalData Managing Director Neil Saunders. Compared to 2019, Q3 company sales fell 6.1%, per GlobalData research. The emphasis on efficiencies has been productive, with progress on inventory management, cost control and more modest markdowns benefiting margins and profits, Saunders said in emailed comments.
“There is nothing at all wrong with this but in our view, it needs to be accompanied by strategies to grow the top line — otherwise it is something of a process of managed decline,” he said, adding that the department store must invest more energy and resources into improving stores, assortments and customer service, and speeding up its rollout of smaller formats.
“The sad truth is that, over time, more and more customers have abandoned Macy’s – and particularly the Macy’s nameplate – because it has simply failed to deliver the shopping experience that they want,” he said. “On top of that, among existing customers share of wallet continues to move downward, largely because of poor standards and execution, especially in stores.”
via https://www.aiupnow.com
Daphne Howland, Khareem Sudlow
