Photo: Macy’s
Macy’s reported a gain in earnings during the fourth quarter, the first time in more than a year, as the department store retailer cut inventory and pulled back on merchandise discounts.
The retailer’s CEO, Jeff Gennette, said that results came in above the company's expectations and that sales, which declined throughout 2020, showed improvement on a quarterly basis.
Mr. Gennette said that Macy’s performance was the result of improvements in categories including beauty, home, jewelry and watches. Digital sales, which were up 21 percent, were key as traffic at the chain’s mall-based locations continues to take a hit due to consumer concerns about the spread of COVID-19.
Macy’s CEO sees the company’s digital channels and strong financial position as instrumental to executing its three-year Polaris turnaround strategy, introduced in February 2020.
Mr. Gennette said the retailer would use 2021 to further accelerate its digital and omnichannel investments and omnichannel initiatives.
“We have shifted a large proportion of our current and future capital to digital, supply chain and technology platforms to better integrate our digital and physical assets and deliver the most relevant shopping experiences. In part enabled by these shifts, we expect that approximately $10 billion in sales will come from the digital channels by 2023,” said Mr. Gennette on yesterday’s earnings call with analysts.
Macy’s CFO Adrian Mitchell said on the call that the chain has found that online sales “per capita are two to three times higher in markets” where the retailer has stores. It has also found over the last five years that online sales are adversely affected when the chain closes a location in a market with multiple stores and even more so when it shutters its sole location in an area.
The chain is expected to shutter another 36 locations in 2021 in addition to the 30 closed last year. Part of Macy’s strategic plan was to close 125 stores over three years in a cost-cutting move that will save $1.5 billion annually.
Macy’s is looking at 2021 for “recovering and rebuilding” its business, anticipating that top line results will pick up in the second half of the year.
Moody’s retail analyst and senior vice president Christina Boni agrees that Macy’s faces headwinds through the first half of 2021 as “mall traffic and apparel demand remain weak.” In an emailed statement, she pointed to Macy’s liquidity and “no revolver borrowings” as financial strengths.