Macy’s has reported strong comparable sales growth in the third quarter as the department store chain continued its strategy to close underperforming locations.
The company’s comparable sales for the quarter ended November 1 rose 2.5 per cent on an owned basis and by 3.2 per cent when licensed merchandise and the marketplace are included. This marked the strongest growth in 13 quarters.
Net sales, inclusive of store closures, fell slightly by 0.6 per cent to $4.7 billion.
“On their own, these are respectable numbers; but in the department store sector and for Macy’s, they are extremely solid and represent a very big chink of light at the end of what has been a very dark tunnel of decline,” GlobalData MD Neil Saunders remarked.
At the Macy’s nameplate, sales decreased 2.3 per cent during the quarter. Saunders said the decline was mainly due to store closures, which, over the long term, will increase the quality of the portfolio.
The chain’s comparable sales, on the other hand, grew 1.4 per cent in total and 2 per cent when including the licensed and marketplace businesses. According to the analyst, this underlines that Macy’s is headed in the right direction and that the investments being put into the business are justified.
“While it would be an exaggeration to say that Macy’s is a retailer at the very top of its game, there is no doubt that it is now becoming a more proficient player on the retail field.
“The sloppy and slapdash execution that once plagued the chain has largely disappeared – at least in stores the company will retain – and has been replaced by a more disciplined adherence to good standards,” he said.
Saunders noted that the biggest change in the company came from the management attitude.
“Prior to Tony Spring, Macy’s seemed to be a business that was content to sit back and accept its fate as a fading icon of retail. This passiveness has now gone and has been replaced by a determination to do better and to build a business that works in the modern era of retail,” he said.
Away from Macy’s, Bloomingdale’s had another fantastic quarter with net sales up 8.6 per cent, thanks to its solid position that captures both premium and luxury customers. Bluemercury net sales were up 3.8 per cent.
On the bottom line, net income slid from $28 million a year earlier to $11 million. Saunders said the weak profit was driven by credit card income.
Despite this, the analyst said the company remains profitable and can strengthen the bottom line over time.
For the full year, Macy’s has raised its guidance and expects comparable sales to be flat or up 0.5 per cent. It previously forecasted comparable sales to decrease 0.5-1.5 per cent.
