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What You Need to Know About Macy’s $5.54 Billion Quarter
Macy’s has reported a strong first quarter, citing a 3.6 percent net increase in revenue from the same period last year. Comparable sales, net income, and stock prices were also up for the quarter.
After a tough year in 2017, with thousands of job cuts and the closure of 100 bricks-and-mortar stores, analysts in the US were expecting the retailer to announce poor results for QI, claiming the well-known department store is “structurally challenged”. However, Macy’s has reported strong performance across its three nameplates, Macy’s, Bloomingdale’s and Bluemercury.
Macy’s has reportedly increased its net sales to $5.54 billion, an increase of 3.6 percent, while also achieving a 3.9 percent rise in comparable sales. Another positive result that Macy’s outlined in a public release is that its net income nearly doubled over the last 12-months, finishing on $139 million for the quarter, which was up from $78 million for the same period in FY17.
The embattled retailer’s stock also finished the quarter on a high, as its value rose nearly 10 percent in pre-market trading on Wednesday, and at 48 cents profit per share, the company’s earnings on each share were reportedly 12 cents higher than earlier estimates of 36 cents.
Why Was Q1 So Profitable For Macy’s?
Over the course of Q1, Macy’s made $24 million in real estate sales, $19 million of which was spent winding down Macy’s China. While the company will remain active on Alibaba’s TMall, the decision was made in FY17 to wind down its physical presence in the country.
“The company has come to a mutual agreement to end the joint venture with Fung Retailing Limited,” a Macy’s representative said to the press.
Macy’s believes the long-term savings in operational costs and the lessened financial strain these stores put on the Macy’s brand will have a positive impact on the company’s overall bottom-line.
The company’s Chairman and CEO, Jeff Gennette also said the brand’s renewed focus on in-store experiences and online shopping positively influenced the businesses Q1 results.
“We are maintaining a healthy inventory position, which helped us deliver improved gross margin,” he said. “The winning formula for [Macy’s] is a healthy bricks-and-mortar business, robust e-commerce and a great mobile experience.”
According to Gennette, Macy’s doubled its online performance in Q1, as customers responded to the brand’s continued improvements on its digital platforms.
Thanks to strong results, Macy’s was also able to increase the businesses profit guidance for 2018 by 20 cents per share, to as high as $3.75 to $3.95.
Results from the most recent quarter follow through on some big achievements for the company over the past couple of months, with the acquisition of New York-based concept store, STORY, and its founder and CEO, Rachel Shechtman, pointing to the company’s eagerness to develop a new approach to its 160-year-old business model.
However, Neil Sanders, the managing director of GlobalData Retail is a little less optimistic about Macy’s current position. According to Sanders, Macy’s brought forward its popular ‘Friends and Family’ promotion, which is usually held in Q2, holding more promotions than it has in the past. Speculation is also circulating that the business won’t be able to continue operating in an environment marked by strong consumer sentiment and spending, as the economy continues to tighten.
“The future danger is that many of these dynamics will not hold as Macy’s moves through the fiscal year,” Saunders said. “[The risk] is that performance may well deteriorate if conditions change.”