Macy’s sees positive outcomes from 2017 strategies that it hopes will propel it toward positive comps this year while fourth quarter sales underscore Dillard’s merchandising strategy.
In a nutshell: Macy’s continued to see improvement in its business—both online and in store—during the fourth quarter.
Chairman and CEO Jeff Gennette said the positive momentum closing out FY17 has provided his team with confidence as they look ahead to 2018. This year, he’s looking to capitalize on strong consumer confidence as well as the company’s test, iterate and scale tactic that has allowed it to onboard new products and services. Gennette also points to how well the team is working together, a point he said that will only prove even more beneficial with the roll out of a new employee incentive plan, which the retailer launched Tuesday. The program, which rewards employees of all types for sales gains, will make all employees eligible to partake in the company’s success while motivating them to remain focused on the overall goal.
Gennette credits the tax reform legislation with providing the ability to invest in Macy’s employees in this way. Macy’s will also use the tax break to allow the company to expand on some initiatives it launched in 2017. Macy’s will expand its Backstage in Store concept from 45 stores to 145 stores this year. The company has experience a 7-point lift in sales where the concept is already in place with what Gennette said has been very little cannibalization of the main business.
As Macy’s continues to execute its North Star transformation plan, the company remains focused on monetizing its real estate. The retailer announced it is selling floors 8 to 14 of its State Street store in Chicago for $30 million to Brookfield Asset Management, which will convert the space into offices. Further, Brookfield is redeveloping nine of the 50 locations that are part of the strategic alliance between the two companies. Macy’s will either sell that space to Brookfield outright or work with the real estate developer on individual joint ventures. Further, the retailer is actively looking to sell the I. Magnin building in San Francisco.
Sales: Macy’s reported a 1.8% sales increase to $8.7 billion for the 14-week fourth quarter, ended Feb. 3. That compares to a $8.5 billion in the same period of 2016. Comp store sales were up 1.3% during the quarter.
Earnings: The company reported net income of $1.3 billion, or $4.31 per diluted share, for the quarter compared to $472 million, or $1.54 per diluted share during the prior year period.
CEO’s Take: “We’ve created momentum and we’re taking that momentum into the new year with a commitment to returning Macy’s Inc to comparable sales growth in 2018. We’re headed into 2018 with an improved base business, healthy inventories and a focused and engaged organization and a clear path to return Macy’s to growth,” Gennette said. “The fourth quarter positive comp sales of 1.4%, which was owned plus licensed, was a significant trend change for us. Looking at the quarter, consumer spending was strong and the cold weather was a benefit. As anticipated, the initiatives that we launched earlier in 2017 kicked in during the fourth quarter. And we delivered improved execution across the brand and across all three of the sub-brands, Macy’s, Bloomingdale’s and Bluemercury. We had great merchandise in all categories. Our holiday strategy was solid, from gifting to self-purchase.”
In a nutshell: Apparel, spanning women’s, men’s and kids, along with men’s accessories performed better than the average sales trends for Dillard’s in the fourth quarter, ended Feb. 3. Beauty, women’s accessories, intimates, home furnishings and footwear performed below trend.
Sales: Net sales for the fourth quarter, which included an extra week, reached $2.06 billion over the $1.94 billion in net sales from the same period last year. The net sales number includes the retailer’s CDI Contractors construction business.
Merchandise sales, excluding CDI, were $2.03 billion, up 7 percent from $1.90 billion during the same time in during the previous fiscal year.
Comp store sales increased 3 percent over the prior year period.
Earnings: The company reported net income for the quarter of $157.6 million, or $5.55 per share, up from $56.9 million, or $1.72 per share, during the prior year period. The net income for the quarter also included approximately $77.4 million in tax benefits from the recently enacted tax reform legislation.
CEO’s Take: “The positive sales trends we noted at the end of the third quarter continued through the fourth. Our 3% comparable store sales increase combined with gross margin improvement and relative expense control led to a notable increase in pretax income for the quarter. We are working to keep this momentum into 2018,” said CEO William T. Dillard, II.