The holiday sales growth at Macy’s is a welcome change according to one analyst, but the US retail giant still has “a very long journey ahead” before it can declare itself on the path to posterity as it revealed plans to shutter 11 stores in early 2018 and a narrowing of its full-year sales guidance.
The retailer said its comparable sales on an owned basis increased 1% in the months of November and December 2017 combined, compared to the same period last year, while it saw improved holiday sales across Macy’s, Macy’s Backstage, Bloomingdale’s, Bloomingdale’s The Outlet and Bluemercury.
Active apparel, shoes, dresses, coats, men’s tailored clothing, children’s were all top performers.
“Macy’s had a solid holiday shopping season, and we are pleased that our November/December performance resulted in positive comp sales for the period, setting us up for a positive fourth quarter,” said CEO Jeff Gennette. “Consumers were ready to spend this season, and we delivered with solid execution, fresher inventory, a curated gift assortment and a focus on customer experience. We saw improved sales trends in our stores and continued to see double-digit growth on our digital platforms. Customers also responded well to our new loyalty program. We intend to close the fourth quarter in a good position and head into 2018 with momentum.”
Gennette adds the retailer plans to build on its 2017 focus of continuing the “strong growth” of digital and mobile into 2018. “A healthy store base combined with robust digital capabilities is Macy’s recipe for success,” he explains.
Meanwhile, Gennette says Macy’s is focused on continuous improvement and will take the necessary steps to move faster, execute more effectively and allocate resources to invest in growth.
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By GlobalDataThese steps include plans to shutter 11 stores in early 2018 – four of which it says were previously disclosed. It will also make staffing “adjustments” across the stores organisation with reductions in some stores and increases in others, and further streamline in some non-store functions.
Macy’s says it expects annual expense savings of US$300m from these actions beginning in fiscal-year 2018, which it intends to reinvest in the business. Also associated with these actions are one-time charges of about $160m to be booked in the fourth quarter of 2017 for restructuring activities, asset impairment, store closings and other costs.
Meanwhile, the retailer is narrowing the range of its previously provided full-year sales guidance. It now expects comparable sales on an owned basis to decline between 2.4%-2.7%, with comparable sales on an owned plus licensed basis to decline between 2%-2.3%. Total sales are expected to be down between 3.6%-3.9% in fiscal 2017. Total sales for fiscal 2017 reflect a 53rd week, whereas comparable sales are on a 52-week basis.
Neil Saunders, managing director of GlobalData Retail, notes the holiday sales growth at Macy’s is a welcome change from the red numbers it usually posts. Moreover, it sends a positive signal that other retailers are on course for a solid holiday season.
However, Saunders says Macy’s success comes with a few caveats. “The first is that growth remains relatively weak and comes off the back of soft prior year comparatives when comparable sales fell by 2.1%,” he explains. “The second is that while Macy’s grew, it did so by far less than the overall sector; as such it is still losing market share both in total and within a number of key categories. The third is that the growth is more a function of a robust market where consumers were willing to spend than a consequence of the various actions Macy’s has taken to-date.”
But none of this is to say that Macy’s doesn’t deserve this result, Saunders admits, but says these results are “simply not strong enough” to suggest that Macy’s has transformed the business nor that future success is guaranteed.
He adds: “Indeed, the company’s announcements of further store closures and more cost-streaming underscore the need for more surgery to restore the business to health. While we believe these actions are necessary, we maintain that the focus should be on growing the top-line through improvements to stores, ranges and the general proposition. In our view, Macy’s still has an enormous amount of work to do here.
“In short, these results are a step in the right direction, but Macy’s has a very long journey ahead of it before it can declare itself to be on the path to prosperity.”
