People walk past a Macy’s store in a Manhattan shopping district on August 12, 2020 in New York City.
Spencer Platt | Getty Images
Macy’s on Tuesday reported a surprise first-quarter profit, as stimulus checks and the Covid vaccine rollout gave consumers more money and greater confidence to head back to the mall and refresh their wardrobes.
The department store chain raised its full-year forecast, saying it’s seeing momentum as consumers head to its shops and go online to buy new outfits for weddings, travel and other special occasions.
During the latest period, luggage was one of the most improved categories year over year, CEO Jeff Gennette said. “Clearly our customer is ready to get on with life.”
Macy’s shares closed Tuesday down less than 1%.
Here’s how Macy’s did during the period ended May 1, compared with what analysts were anticipating, based on Refinitiv estimates:
- Earnings per share: 39 cents adjusted vs. a loss of 41 cents expected
- Revenue: $4.71 billion vs. $4.37 billion expected
During the quarter, Macy’s swung to a profit of $103 million, or 32 cents per share, compared with a loss of $3.6 billion, or $11.53 per share, a year earlier.
Excluding one-time charges for impairment and restructuring, the early retirement of debt and income tax impact, Macy’s earned 39 cents per share. Analysts were looking for a 41 cent loss, according to a survey from Refinitiv.
Net sales grew to $4.71 billion from $3.02 billion a year earlier. That exceeded expectations for revenue of $4.37 billion.
In the year-ago period, Macy’s sales tumbled 45% as the Covid pandemic forced its stores to temporarily shut and shoppers shifted their spending toward groceries and cleaning supplies, and away from clothing and footwear.
In the latest period, comparable sales rose 62.5%, topping FactSet estimates for 44.9% growth.
Sales were boosted in part by the addition of new shoppers. Macy’s said it added 4.6 million customers during the quarter, a 23% increase from the same period in 2019. It said 47% of those new shoppers made online purchases.
Digital sales climbed 34% year over year and grew 32% from 2019 levels.
E-commerce sales represented 37% of net sales, a 6 percentage-point drop from a year earlier, when Macy’s stores were shut and its only revenue stream was digital. But that’s a 13-point improvement from the first quarter of 2019, Macy’s said.
Americans have recently showed signs they’re ready to get back to more normal shopping habits. Sales of clothing and clothing accessories surged 727% in April from a year earlier, according to data from the Commerce Department.
Gennette cited continued strength in categories including home, fine jewelry and watches, fragrance and luxury items. He said special occasion categories are improving as customers begin to travel and return to a “pre-pandemic lifestyle.” Macy’s is also investing in newer categories for the business, including toys, health and wellness, and pets, he said.
Macy’s is now calling for net sales in fiscal 2021 to fall within a range of $21.73 billion to $22.23 billion, up from a prior range of $19.75 billion to $20.75 billion.
It estimates it will earn $1.71 to $2.12 per share, after adjustments. Previously, it expected adjusted earnings of 40 cents to 90 cents per share.
Analysts had been looking for adjusted earnings of 79 cents per share on revenue of $20.7 billion, according to Refinitiv.
“We don’t see this as a short-term pop,” Gennette said during an earnings conference call. “There are pent-up demand opportunities … that give us confidence for accelerated profitable growth in 2021 and beyond.”
Macy’s is continuing to invest in its online business and still plans to grow e-commerce sales to $10 billion by 2023.
The company, which also owns Bloomingdale’s and the beauty chain Bluemercury, is beginning to test smaller stores in off-mall locations and is opening more of its off-price stores, known as Macy’s Backstage, to target more price-conscious customers.
“One of the biggest concerns from vendors and analysts have been that they expected to see more cannibalization,” Gennette said about Macy’s planned off-price expansion.
But, he said, shoppers that visit Macy’s full-price department stores in addition to its off-price outlets are some of the retailer’s best customers.
As of Tuesday’s market close, Macy’s shares are up about 70% year to date. The retailer has a market cap of $6 billion.
Find the full earnings press release from Macy’s here.