Macy’s sees improved performance as gross margin rose and e-commerce gained, Kohl’s sales hit by hurricanes, and Marks & Spencer accelerates transformation plans, including reducing home and clothing floor space.
In a Nutshell: Net income more than doubled, while sales fell slightly, mostly due to store closures, in the third quarter, at Macy’s Inc. The company said its new loyalty program, special in-store experiences and a strong mobile and online presence is expected to help drive holiday sales. Macy’s added that it expects continued improvement in trends in the fourth quarter, including a solid lift from loyalty and digital, and intends to head into 2018 with momentum.
Sales: Sales in the third quarter ended Oct. 28 fell 6.1% to $5.28 billion, compared with sales of $5.63 billion in the third quarter of 2016. Macy’s said the year-over-year decline reflects, in part, planned store closures. Comparable sales were down 4 percent in the quarter.
Earnings: Net income more than doubled to $34 million in the period from $15 million last year. Operating income for the quarter was $121 million, or 2.3% of sales, compared to $107 million, or 1.9% in the year-ago period.
CEO’s Take: Jeff Gennette, chief executive officer, said: “Overall, we’re pleased with the results for the third quarter and we remain on track to meet our full-year sales and earnings guidance for 2017. Importantly, we also saw better gross margin performance primarily due to our tightly controlled inventory position. A highlight of the third quarter was the launch of the new Star Rewards loyalty program-our best customers are responding positively. We also saw continued double-digit growth in digital and are encouraged by the potential of Backstage in Macy’s stores.”
[Read more about Macy’s: Macy’s Positions for Speed, Ramps Up Off-Price Model]
In a Nutshell: Kohl’s saw net income decline in the third quarter, as total sales were basically flat. The company touted a small comparable store sales increase, saying the traffic momentum it experienced in the first half of the year continued in the period. The company now expects higher fiscal 2017 diluted earnings per share of $3.72 to $3.92, which includes the impact of a fourth quarter tax settlement, compared to its prior guidance of $3.50 to $3.80 per diluted share.
Sales: Sales in the third quarter ended Oct. 28 rose 0.1% to $4.33 billion, with comp-store sales inching ahead 0.1% compared to a decline of 1.7% in the year-ago period. For the nine months, sales fell 1.3% to $12.32 billion from $12.48 billion a year earlier. Comp-store sales were down 1 percent in the first three quarters compared a 2.4% decrease in the year-ago period.
Earnings: Net income in the quarter declined 20 percent to $117 million from $146 million last year. However, for the nine months, net income increased 29 percent to $391 million from $303 in the 2016 period.
CEO’s Take: Kevin Mansell, chairman, CEO and president, said, “We saw strong results during the back-to-school season, achieving a low single-digit positive comp. The middle of the quarter was soft as we experienced disruptions from the hurricanes and other unseasonal weather. The quarter closed with strong sales in the second half of October.”
Marks & Spencer
In a Nutshell: Marks & Spencer announced Wednesday that it is redoubling its transformation efforts, with CEO Steve Rowe saying, “we are accelerating our plans to build a business with sustainable, profitable growth, making M&S special again.”
As such, the retailer plans to reduce the clothing and home space by 1.5% by the end of 2018, while the food category will claim 5 percent more space, representing a slowdown in its once promising food concept. At the same time, the company remains committed to right sizing its fleet to focus on high volume locations.
In the meantime, M&S is striving for a digital first approach, which it anticipates will result in “significant” e-commerce growth with one-third of clothing and home sales generated online.
Earnings: Revenue for the first half of FY18 was up 2.6% to 5.1 billion pounds ($6.7 billion) from just under 5 billion pounds ($6.6 billion) for the same period last year.
Clothing and home revenue was flat for the half at 1.8 billion pounds ($2.4 billion). Same store sales for clothing and home dipped by 0.1% in the second quarter, compared to the same period last year.
Clothing and home saw a 5.3% increase in full price sales, which the company attributes to lower prices and fewer promotions and clearance sales. Gross margin for the sector was up 140 basis points.
CEO’s Take: “We have made good progress in remedying the immediate and burning issues at M&S I outlined last year. In Clothing & Home early results are encouraging and in International we now have a profitable and robust business. We recognise now that we face stronger headwinds in Food which will be addressed in the year ahead,” Rowe said.
“The business still has many structural issues to tackle as we embark on the next five years of our transformation, in the context of a very challenging retail and consumer environment. Today we are accelerating our plans to build a business with sustainable, profitable growth, making M&S special again.”