Macy’s got a bigger-than-expected boost online during the latest quarter, even as its stores started to reopen during the coronavirus pandemic.
The department store operator’s digital sales surged 53% from a year earlier, as more shoppers visited its website to buy workout clothes and home decor. The company also said luxury categories at Bloomingdale’s outpaced internal expectations. That helped it report a narrower loss and higher overall revenue than analysts were expecting.
Still, with so much uncertainty in the industry ahead of the all-important holiday season, CEO Jeff Gennette said Macy’s is planning conservatively for the remainder of 2020, and the company didn’t provide a financial forecast.
The retailer is planning for its same-store sales to be down in the low-to-mid 20% range during the fall season. It said its profit margins are expected to peak in the third quarter, as shipping expenses and other heightened costs during the holidays are set to weigh on earnings toward the end of the year.
Interim Chief Financial Officer Felicia Williams said Macy’s is anticipating “slightly stronger digital growth and slightly weaker store recovery given some of the disruption around the country” in the months ahead.
Macy’s shares were up nearly 6% in premarket trading.
Here’s how the retailer did during its fiscal second quarter ended Aug. 1 compared with what analysts were expecting, based on Refinitiv data:
- Loss per share: 81 cents vs. a loss of $1.77, expected
- Revenue: $3.56 billion vs. $3.48 billion, expected
Macy’s swung to a net loss of $431 million, or $1.39 a share, compared with a profit of $86 million, or 28 cents per share, a year earlier. Excluding one-time charges, it lost 81 cents per share, better than the $1.77 loss per share forecast by analysts.
Macy’s net sales dropped 35.8% to $3.56 billion from $5.55 billion a year earlier, but that outpaced expectations of $3.48 billion.
Sales online and at Macy’s stores open for at least 12 months, on an owned plus licensed basis, were down 35.1%. Analysts had been calling for a decline of 28.2%, according to Refinitiv estimates.
Macy’s said its digital sales represented 54% of its total owned comparable sales, with its stores shut for a period of the quarter. Its store sales fell 61% during the period, it said, but by the start of the third quarter were trending slightly better, down 40%.
The company said it ended the second quarter with a strong liquidity position. It had roughly $1.4 billion in cash on its balance sheet.
Its inventories were down 29% from a year earlier.
In June, Macy’s announced it would be cutting 3% of its workforce, or 3,900 corporate jobs, to reduce costs during the pandemic. The company has said it expects to save about $365 million through the layoffs in fiscal 2020.
America’s department stores have been struggling more than other retailers through the coronavirus crisis. Neiman Marcus, Stage Stores and others have filed for bankruptcy in 2020. Increasingly, it seems, these companies aren’t viewed as worth salvaging. Lord & Taylor, after nearly two centuries in business, announced last week it is liquidating its remaining 38 stores.
And talks among bidders to rescue J.C. Penney from bankruptcy have hit a stalemate, leaving it up to the companies’ lenders to strike some sort of last-minute deal for survival.
Looking ahead to the holiday season, Gennette said the retailer expects people will be gifting fewer experiences this year and instead looking to buy home and beauty items for others. That could benefit Macy’s, and others, that have ceded dollars during past holiday seasons to people gifting concert tickets instead of jewelry.
He expects shoppers to buy earlier this year, even ahead of Thanksgiving. A number of other retailers including Kohl’s and Nordstrom have hinted as this trend, too.
“The time between Thanksgiving and Christmas is still going to be incredibly important,” Gennette told analysts Wednesday, even if shopping begins earlier
Macy’s stock as of Tuesday’s market close was down more than 58% this year. It has a market cap of $2.2 billion.
Find the full earnings press release from Macy’s here.