Macy’s encouraged by better-than-expected Q2 results

Macy’s second quarter sales and profit topped estimates, but the company knows it still has a long road ahead as it works to stabilize the brick-and-mortar business.

“We are on track to meet 2017 sales and earnings guidance,” said Jeff Gennette, Macy’s president and CEO. “We saw a notable contribution from the full execution of our new women’s shoe and jewelry models and the continued successful testing of Backstage in store. We are excited about plans for fall, including the launch of a new loyalty program and the new marketing strategy, which we anticipate will further improve our sales trend in the back half of the year.”

Net income surged to $116 million, compared with $11 million in the year-ago period. Despite a decline of 5.4% from last year, sales for the quarter were better than expected. Comp sales dipped for the tenth straight quarter, but the rate of decline has slowed down — 2.8% on an owned basis and 2.5% on an owned-plus-license basis — an encouraging sign that the company’s turnaround efforts are starting to gain traction.

Other positives in the quarter include the company’s private brands. Avec Les Filles by Joyce Azria, one of Macy’s recently launched private brands, is doing very well, according to Gennette. Looking ahead, he anticipates a strong performance from the upcoming Anna Sui collection for I.N.C., which will launch in the fourth quarter. And there’s more to look out for as Macy’s continues to build its private brands arsenal. “We’re on track with our private brands and our market partners to take the exclusivity quotient from 29% to 40% over time,” he added. Although he did not elaborate, Gennette told analysts the company has action strategies for its 20 or so private brands.

Gennette is also very happy with the way the Bluemercury business is going. “Their new stores are performing particularly well. We're making good real estate decisions. We're going into markets. There are lots of opportunities for freestanding stores, and there's also then Bluemercury within Macy's stores,” he said. The company has also taken the lessons learned from the Bluemercury business and using it as a blueprint for a beauty spa model in Macy’s stores. “The hope is,” Gennette said, “that we're going to have an actionable model to scale into a lot more Macy's stores in the future.”

 

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