Skip to main content

Macy’s CEO: We’ve ‘Successfully Managed the Channel Shift’

Macy’s Inc. narrowed its losses in the third quarter and topped consensus revenue estimates, while CEO Jeff Gennette touted the retail giant’s dexterity in managing the “channel shift” that has drawn shoppers away from stores and onto the web.

In a Nutshell: Macy’s managed to generate a positive EBITDA (earnings before interest, taxes, depreciation and amortization) one quarter sooner than expected, with its $113 million unadjusted performance indicating solid operational efficiency. Positive adjusted EBITDA was $159 million.

The department store retailer, which lefts its available $3 billion asset-backed credit facility untapped, finished the third quarter with $1.6 billion in cash. Gennette said Macy’s quarterly results “were driven by disciplined cost management, strong execution by our colleagues and an early start to the holiday shopping season,” and “reflect solid performance across all three brands—Macy’s, Bloomingdale’s and Bluemercury.”

Macy’s has rolled out its DoorDash same-day delivery partnership to all stores, and Gennette said customers have embraced fulfillment offerings including pickup inside stores or at curbside as well as delivery completed on the day an order is placed.

On an earnings call Thursday, Gennette said Macy’s has “successfully managed the channel shift” at play in retail that is drawing shoppers to digital commerce amid lockdowns and social distancing. The retailer, he added, has “shown we can flex categories and price points as customers’ needs change,” thanks to Macy’s teams closely monitoring customer feedback and parsing shopper data.

Related Stories

Gennette said Macy’s will reinvest in office-friendly attire once a timeline for a Covid-19 vaccine distribution becomes clear. The company is gearing up to test smaller, off-mall concept stores.

Newly named chief financial officer Adrian Mitchell said on the call that while the “supply chain opened up, bottlenecks remain.”

Net Sales: Macy’s said net sales for the three months ended Oct. 31 fell 22.9 percent to $3.99 billion from $5.17 billion, while store sales fell 36 percent compared to the year-ago quarter.

Among the highlights in the quarter, digital sales grew 27 percent versus year-ago figures for the same period, while digital sales were 38 percent of total owned comparable sales. Comparable sales were down 21 percent on an owned basis and down 20.2 percent on an owned plus licensed basis, due to continued recovery at the store level and the growth of digital. With the early start to holiday shopping, some sales that would traditionally occur in the fourth quarter were pulled forward into the third.

“Customers have shifted their spending to casual apparel and categories they can enjoy as they stay at home. Several of these categories, including home furnishings, jewelry and fragrance, have generated double-digit sales growth compared to last year,” Gennette said.

The company said gross margin for the third quarter was 35.6 percent, up from 23.6 percent in the second quarter. The gross margin rate for the third quarter a year ago was 40.0 percent. The sequential improvement was driven by disciplined inventory management, better sell through of full-price and clearance merchandise and lower clearance markdowns, Macy’s said.

The company also said inventory was down 29 percent from the year-ago quarter. “The company exited the quarter in a clean inventory position,” Macy’s said.

For the nine months, net sales were down 34.9 percent to $10.57 billion from $16.22 billion.

Earnings: The net loss was $91 million, or 29 cents a diluted share, against net income of $2 million, or one cent, in the year-ago quarter. On an adjusted basis, the diluted loss per share was 19 cents.

Wall Street was expecting an adjusted diluted loss of 79 cents on revenue of $3.86 billion.

While the company hasn’t been providing either sales or EPS guidance for the year, it expects comp sales to be down low- to mid-20’s for the fall season. Digital sales are expected to see a low- to mid-teens increase for the full year. Macy’s also expects adjusted EBITDA to improve sequentially in the fourth quarter from the third quarter, while capital expenditures are eyed at $450 million.

For the nine months, the net loss was $4.10 billion, or $13.20 a diluted share, against net income of $224 million, or 72 cents, in the year-ago period.

CEO’s Take: “Looking to Holiday 2020, we know this year is different. We are committed to bringing the joy of the season to America as we do every year. From next week’s Thanksgiving Day Parade to reimagined family gatherings, we will help our customers and their families celebrate in style. We have the right gifting assortment with newness from value to luxury, and our expanded fulfillment options allow customers to shop safely and conveniently, in store or online,” Gennette said. “We continue to watch the resurgence of Covid-19 and its potential impact on our business. Our teams are executing well and have shown the flexibility and agility to adjust plans and provide a great omnichannel experience to our customers.”