The luxury customer gave Macy’s a boost in the third quarter as the company’s prospects evolve given opportunities to leverage its upscale store concepts and execute against its omnichannel strategy with a mix of online and brick-and-mortar initiatives.
Macy’s beat a Yahoo Finance-published analyst consensus estimate on earnings, which called for a 19 cents per adjusted dilated share result, and revenues, which called for a $5.2 bill result.
Macy’s comparable sales slipped 3.1% on an owned basis and down 2.7% on an owned-plus-licensed basis, the company reported. Macy’s banner comparable sales were down 4.4% on an owned basis and down 4%, on an owned-plus-licensed basis. Bloomingdale’s comps on an owned basis gained 5.3% and on an owned-plus-licensed basis advanced 4.1%. Bluemercury comps gained 14% on an owned and owned-plus-licensed basis, Macy’s reported.
Net sales were $5.23 billion versus $5.44 billion in the year-earlier quarter.
In a conference call, Jeff Gennette, Macy’s chairman and CEO, said brick-and-mortar sales decreased 1% in the quarter year over year, while digital sales decreased 9% as online conversion slipped, suggesting that shoppers are researching online but purchasing in stores more than previously. Gennette pointed out that the off-mall, small and curated Market by Macy’s stores, with eight in operations, are part of the company’s omnichannel strategy, filling in markets where Macy’s has no other physical presence and potentially replacing department stores where that might make sense. He said Market by Macy’s “conversion rates are generally higher than that of our full-line stores, and these locations continue to outpace the respective trade areas in acquisition of new customers.”
Gennette noted luxury banners Bloomingdale’s and Bluemercury outperformed the Macy’s nameplate, suggesting that affluent customer behavior is being affected less by inflation than is the case with more middle class shoppers. He said expanding these luxury banners is a particular growth opportunity.
Company-wide end of quarter inventories were better than Macy’s expected, Gennette added.
Gennett said, “Our Polaris strategy is working. In the third quarter, we achieved solid top-line results and a strong beat to our bottom-line guidance. Macy’s brand position as a style and fashion source resonated with our customers, while luxury continued to outperform at Bloomingdale’s and Bluemercury. Retail is detail, and our talented and agile team are executing well to compete. We know the consumer is under increasing pressure and has choices on where to spend. As a leading gifting destination with fresh inventory across the value spectrum, we are ready to meet our customers’ needs this holiday season.”
Macy’s CFO Adrian Mitchell added, “We are operating from a position of strong financial health with appropriate levels of inventory, a strong balance sheet with ample liquidity, investment grade credit metrics and fixed interest rate debt in a rising interest rate environment. We have the tools, data-driven processes and talented teams to manage through this uncertain time and are committed to long-term, profitable growth.”