Macy's earnings came in better than its own guidance and the company suggested in a conference call that it is poised to improve its operational performance with the full roll out of its My Macy's initiative boosted by better performance online and stronger sales on moderately priced products including private labels.
The company, with relatively high debt and continuing restructuring challenges after a string of acquisitions, still may be characterized as struggling, but management has more clearly staked its reputation on the My Macy's initiative. Heck, CEO Terry Lundgren even dropped in on the conference call, a rare such appearance, to tout the effort. Macy's reported a net loss of 21 cents per diluted share or 16 cents excluding restructuring charges that included investments in My Macy's, which creates 69 local districts across the United States charged with making product presentation more community responsive. Comparable store sales were off by nine percent in the quarter while overall sales were down 9.5%.
Macy's had guided for a loss between 19 and 21 cents after charges. The Reuters average analyst forecast, after charges, was negative 20 cents per share.
Overshadowed by a softer U.S. Commerce Department retail sales report for April, Wall Street frowned on Macy's financial announcement, particularly its reluctance to upgrade full-year earnings guidance, and the retailer's shares fell. Yet, CFO Karen Hoguet pointed to some positives:
Our performance in the pilot My Macys's districts continue to outpace the other stores, and, in fact, the gap widened. In the fourth quarter, sales in those My Macy's pilot stores performed 1.5 points better than the other stores, and, in the first quarter, that gap widened to 2.1 points.With systems and personnel in place, the My Macy's program is rolling out from 20 10-to-12 store pilot districts to the full chain. Hoguet said the performance pick up might not continue accelerating as all 69 districts are brought on line. Still, Macy's does expect to get a chain-wide lift from the program. She added that smaller stores, which tend to get less attention than the big showcase outlets, should see a greater relative boost.
Internet-based commerce, said Hoguet, was "another bright spot in our business." Revenues generated by websites at both Macy's and Bloomingdale's gained over 16 percent in the first quarter. She noted:
We remain very excited by the possibilities for our direct to customer strategy and how it is becoming increasingly integrated with the stores. We know that our best customers at both Macy's and at Bloomingdale's shop both in the stores and on line. And in fact customers who shop on line actually buy more in the stores than our customers who buy only in store.Product categories that performed best versus worst suggested that Macy's shoppers are being modest in their spending. Moderate apparel, dresses, suits, cosmetics and housewares were strong while better apparel, handbags, luggage and furniture were weak.
Private label, Hoguet said, "was very strong in the quarter across categories, demonstrating the importance of affordable fashion."
On the home side, Hoguet said cookware and tableware might be better because consumers are staying home more, but she added that all the influences are not external. Macy's exclusive Martha Stewart Signature housewares have been doing "very well," she said, based on the low price and strong value proposition offered.
On the other hand, she said consumers are avoiding big-ticket furniture purchases in the present environment and that luggage has suffered as consumers have cut back on travel.