Macy’s Experiences Second-Quarter Losses, Small Format Location Expansion
Macy’s reported weaker second-quarter earnings, shedding light on weaker consumer spending that may continue through the upcoming holiday season.
The retailer reported net sales of $5 billion, down 8% compared to the second quarter of 2022. Bloomingdales also experienced a sales decrease of 2.7%, while on the flip side, Bluemercury experienced an increase of 5.8%.
The retailer was looking to enter fall in a clean inventory position after experiencing excess spring seasonal receipts due to lower-than-anticipated demand at the back of the first quarter and ended with second-quarter inventories down 10% compared to last year.
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“We were disciplined with our approach to inventory commitments and flex the cadence and depth of promotions and markdowns, utilizing our data-driven tools to reduce the length of seasonal clearance activity by several weeks,” said Jeff Gennette, current CEO of Macy’s, who will be retiring in February 2024.
Macy's credit card revenue took a massive hit with a 41% decrease, driven by an increase in the speed of delinquencies, while the gross margin rate exceeded expectations, with the outlook for shortages remaining unchanged.
"Shortage continues to be a headwind, and we are focused on a variety of mitigation strategies, including testing the use of advanced technology, reporting, and tools; moving high-theft product away from entrances in our stores, optimizing asset protection staffing to target high-risk areas and collaborating with external parties to advocate for legislative change,” said Adrian Mitchell, chief operating officer and chief financial officer for Macy’s.
The retailer is committed to its 2023 sales expectations of $22.8 billion to $23.2 billion, with adjusted full-year profit per share between $2.70 and $3.20.
On a recent earnings call, the retailer shared it is focusing on three fundamental areas to build a faster and more efficient operating model:
- Improving end-to-end omnichannel shopping experiences
- Optimizing physical store footprint
- Modernizing their supply chain and technology infrastructure
Small Format Locations
Macy’s recently announced the expansion of its small-format locations into the U.S. Northeast and Western regions, providing an easy-to-shop environment highlighting well-known market and Macy’s private brands, convenient services, local events, and direct access to the latest trends.
“We're very excited about the growing impact of our small-format stores,” said Mitchell. The expansion will include Boston, Las Vegas, San Diego, and Chicagoland, with plans to open a small format Bloomingdale’s within the Seattle market, which will be their third location.
“As we think about the quality of experience for our customers, we continue to see positive signals in terms of the financial performance and the customer experience within these stores,” added Mitchell. “So, we're actively evaluating potential locations across the country that will enable us to accelerate growth at the appropriate time. So more to come on this topic.”
Appointment
Macy’s also brought on Massimo (Max) Magni as chief customer and digital officer to lead the company’s customer and digital organization.
Max will enhance customer-centric strategies to improve the consumer experience across various touchpoints, including the company’s e-commerce sites, mobile apps, marketplace, loyalty, and gift registry programs. A core focus will be to increase personalized engagement across Macy’s and Bloomingdale’s digital platforms, along with in-store, and provide mobile enhancements that provide a seamless and interactive shopping experience for the consumer.
President and incoming CEO Tony Spring mentioned that the retailer, “Recently launched several new tools that will allow us to speak even more consistently to our customers across touchpoints, personalized conversations and increase the amount of behaviorally-driven marketing.” He added that the digital and technology teams are in the early stages of implementing multi-step and multi-channel tests.
