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On Macy’s Conference Call, CFO Talks Strategy, Plots a Mild Course

Macy’s Inc. is advancing its omni-channel and online sales plans, with few changes from 2012 in the works.

The company released financial results and held its investor conference call today. They had strong growth in 2012, adding $1 billion in top line sales and increasing income as a percentage of sales from 14.4% to 14.9%.

Online sales are up 41% for the year, and the company has been experimenting with ways to increase the crossover from e-commerce to bricks and mortar – part of the company’s omni-channel strategy.

Chief Financial Officer Karen M. Hoguet said in the conference call that Macy’s is keeping goods listed online that are only available in stores, and are keeping products on display in stores that are not warehoused at the store so shoppers can see and interact with them. Online to store has been more successful than store to online, she reported, with over 700 goods being shown online but fulfilled in stores.

Macy’s is pursuing an innovative strategy of using its stores as mini-distribution centers, fulfilling orders from all channels from their store inventories when possible. Asked about the potential reach of this strategy, Hoguet said, “We’re going to have 500 fulfillment centers up this year, which represents about 85% of our business, and we may increase it from there.”

The company is also developing its phone and tablet apps to produce a seamless shopping experience. Hoguet said, “Mobile is clearly becoming more important, whether it be tablets or smartphones.”

She encouraged people not to overemphasize the role of online, however. “A lot of the growth and attention is on this dot-com and omni channel, which is helping us tremendously in terms of growth, but the lion’s share of our business is still plain old store sales.”

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The company didn’t issue an absolute online sales number for 2012, but they did comprise 3.3% of same store sales growth.

Increased online sales have also benefited margins, as fulfilling those orders has lower overhead costs. Hoguet seemed optimistic about the potential for pushing that margin growth, and didn’t seem phased by the high labor costs involved in full omni-channel fulfillment.

In the earnings press release issued Feb. 26th, CEO Terry Lundgren said, “We are accelerating progress in omni-channel strategies at Macy’s and Bloomingdale’s to bring together our efforts in stores, online and mobile in a manner that satisfies emerging shopping patterns and capitalizes on the strength of our inventory regardless of where the customer demand occurs.”

One laggard sector at Macy’s is women’s wear. Private labels have done well, but “overall the numbers have not been as strong as the rest of the store.” Hoguet anticipates higher sales from their new Impulse store and forecasts numbers rising in the fall season.

Lundren said, “We continue to see significant upside opportunity ahead in those strategies that have worked so well since we reorganized the company in 2009. Going into 2013, our team is moving ahead with new plans and actions to sharpen our approach to localized merchandise assortments and marketing, which we continue to believe is Macy’s sustainable competitive advantage.”