KEY POINTS

  • Macy’s reported 3Q18 revenues of $5.4 billion, up 2.3% year over year and in line with the consensus estimate of $5.4 billion. Adjusted EPS was $0.27, up 28.6% from the year ago quarter, above the consensus estimate of $0.15 and above last year’s EPS of $0.21.
  • The company’s comparable sales grew by 3.1% on an owned basis, beating the consensus estimate of 2.6%, and the 3.3% on an owned plus licensed basis.
  • Macy’s raised its full year 2018 EPS guidance to $4.10–$4.30 from $3.95–$4.15. The company raised the low end of its revenue growth guidance to +.03%–0.7% from flat–0.7%, below the consensus estimate of +0.9%.  

Fiscal 3Q18 Results

Macy’s reported 3Q18 revenues of $5.4 billion, up 2.3% year over year and in line with the consensus estimate of $5.4 billion. Adjusted EPS was $0.27, up 28.6% from the year ago quarter, above the consensus estimate of $0.15 and above last year’s EPS of $0.21.

Macy’s sales grew by 3.1% on an owned basis, beating the consensus estimate of 2.6%, and 3.3% on an owned plus licensed basis.

The company reported that its e-commerce business completed another consecutive quarter of double-digit growth. This year Macy’s anticipates it will reach $1 billion in online sales.

This quarter, Macy’s marked the one-year anniversary of its new loyalty program, and reported that platinum customers are spending more and shopping more frequently. Macy’s credit card holders are automatically enrolled in Macy’s loyalty program at the silver, gold, or platinum level depending on how much they spend annually. Macy’s expanded its loyalty program to include a bronze tier for non-credit card holders, adding two million new members.

Macy’s also added 121 Backstage locations this year, with nearly new 60 locations in the third quarter alone, totaling 166 Backstage in-store locations. Macy’s Backstage is its off-price department, store-within-the-store retail concept. The company is ramping up Backstage marketing with an emphasis on off-price products that is on trend and arriving daily in its stores. Macy’s sees a lift in entire store sales when a Backstage store is added, as Backstage stores help bring new customers into the stores.

Macy’s completed the expansion of store pickup options in the third quarter which includes Buy Online, Pickup In Store (BOPIS). Customers order merchandise online, choose the store to pick up and Macy’s has it ready in two hours or less.

The company also offers Buy Online, Ship to Store (BOSS) where customers have access to merchandise anywhere in Macy’s system, including its Vendor Direct system, where Macy’s curates the assortment that is localized to a specific market. The Vendor Direct system includes an expanded assortment of national brands and the company reports that it has doubled the number of SKUs online since the launch of Vendor Direct in April, 2018. Using BOSS, the merchandise is shipped to the consumer’s closest Macy’s neighborhood store for pickup. The company reported greater-than-anticipated use of BOSS.

To service BOPIS and BOSS, Macy’s launched “At Your Service” centers in every store for easier pickup. The centers also handle returns, self-checkout assistance, and customer service requests.

The company reported its Growth 50 stores, its magnet stores, are performing ahead of peer stores. Macy’s invested in 50 stores as part of its “Growth 50” plan with initiatives and renovations that included new lighting and fixtures, new merchandising and product assortments, and technology upgrades and innovations. The company will roll out the “Growth 50” treatment to another 100 stores in 2019.

Outlook

Macy’s raised its full year 2018 EPS guidance to $4.10–$4.30 from $3.95–$4.15 previously. The company raised the low end of its revenue growth guidance to +.03%–0.7% from flat–0.7%, below the consensus estimate of +0.9%.


Leave a Comment