Shoppers browse in Macy's Inc. store at the Beverly Center mall in Los Angeles, California, U.S., on ... [+]
BLOOMBERG NEWSThe second quarter report for Macy’s sounded good as the company claimed that sales for Macy’s, Bloomingdale’s, and BlueMercury were all stronger than anticipated. Sales dropped 61%. The company saw internet sales that topped out in June at +50% maintain an increase of +25% in July. The company will open smaller stores for Bloomingdale’s and Macy’s with less emphasis on fashion and more attention to home. Inventory was under tight control and 29% less than last year.
Let’s assume that Macy’s digital business was pretty strong before the pandemic started, giving them a higher base than other store companies. In the quarter, sales increased +53%, and I think these results were acceptable building off that high base. They moved their digital office from San Francisco to New York earlier this year and have a more focused orientation with new staff.
CNBC’s Lauren Thomas collected data on digital increases for retailers in the quarter. Here are the results: Best Buy BBY +242%; Target TGT +195%; Dick’s Sporting Goods DKS +194%; Lowe’s +135%; Tiffany +123%; Home Depot HD +100%; Walmart WMT +97%; Gap +95%; Kohl’s +58%; Abercrombie & Fitch ANF +56%; Macy’s +53%; Nordstrom JWN -5%. CNBC added that Urban Outfitters URBN had double digit increases and Tapestry (Coach and Kate Spade) had triple digit increases.
One can easily conclude that Macy’s had a lot of competition for internet sales despite the fact that they started early to promote on the internet and had pick-up stations in stores set up and running early as well. Now the company is concentrating on curbside pickups in markets where some stores closed again due to the rise of COVID-19 coronavirus cases. (Some California stores that had been forced to close and may reopen next week.)
For second quarter 2020, net sales dropped 35.8% from $5.546 Billion to $3.559 Billion. Comparable store sales were down 35.1% on an owned-and-licensed basis. Net income dropped from $86 Million to a loss of $(431) Million. Fully diluted earnings per shares dropped from $0.28 to a loss of $(1.39).
Management pointed out that the quarter (as well as the first quarter of 2020) had the benefit of tax law changes resulting from coronavirus aid. (Cares Act). This may affect the sales in the second half of the year.
Conclusion
I conclude after an 1 ½ hour conference call that management is cutting expenses even more (selling costs will be cut from a planned reduction of $900 Million to a reduction of $1.5 Million), and it is still deciding how to handle the Christmas business since the competition is likely to start their Christmas/Chanukah sales early. While management indicated that in past years early promotions did not work, perhaps this year customers will try to avoid crowds and shop earlier. I am doubtful that this will be the case since money is tighter than ever and people will wait to shop shortly before they need gifts.
What else did we learn from the long discussion?
1. Jeff Gennette and his staff are working hard to sense the consumer’s wants. They have more to learn.
2. Some progress can be seen - New customers are flocking to Macy’s; the company has gained almost 4 Million new, younger customers.
3. The company is shifting to more casual apparel and may reduce the fashion assortment.
4. Bloomingdale’s luxury collections are doing well, especially jewelry, handbags, home.
5. The company will expand its Outlets (Backstage and Bloomingdale’s Outlet) in free standing locations.
6. The company is hurting because of lack of foreign and local visitors – especially in its flagship locations.
7. Asset sales (real estate) will probably rise from $16 Million, but go up to only $50 Million as real estate valuations have been under pressure.
8. The company will continue to rely on expense cuts to improve results.
How do I feel about Macy’s?
I am surprised that management does not recognize all the ways that the customer has changed dramatically in this pandemic period and how interests have shifted. I feel that selective focus on apparel is appropriate and attention to home is essential – since customers spend more time at home. However, I feel that stores should also veer towards technology – and attract younger customers with new product assortments supported by savvy counselors for advice and care. Yes, it’s a copy of Best Buy’s Geek Squad, but Macy’s would win customers by presenting a tech assortment of wanted items. Macy’s should also have some initiatives that will be uniquely theirs and have national appeal.
The next few months will be difficult for Macy’s. The holiday business will be very competitive, and people will count their pennies when shopping. However, Macy’s and Bloomingdale’s are nationally recognized purveyors of fashion and hot trends that they can, and should, emphasize across every product category. If they stay focused on meeting changing customer needs and keep expenses in line, they may be able to come out of this pandemic leaner in staff and inventory and stronger in their will to survive.
The Link LonkSeptember 03, 2020 at 06:10PM
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Macy’s Has Some Digital Spark And A Lot Of Work Ahead - Forbes
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