Macy’s (M) Q3 2021 earnings beat

Macy’s On Thursday, its fiscal third-quarter earnings and sales report beat analysts’ expectations, prompting the department store chain to raise its full-year forecast ahead of the holiday season.

Separately, the company teased its digital marketplace launch slated to launch in the second half of 2022 and said it has hired consulting firm AlixPartners to review its business structure.

Shares of Macy’s closed up 21.1%. At one point, the stock hit a three-year high of $37.95.

Notifications come like activist Jana Partners got into the business and is pressuring Macy’s to pull back its e-commerce operations from its stores, in the hope of garnering a higher valuation. Saks Fifth Avenue pursued a similar split earlier this year. Its e-commerce unit is now is said to be preparing for an initial public offering at a valuation higher than it has seen after turned out from Saks’ stores.

“We also recognize the important value that the market is assigning to pure e-commerce businesses,” said Macy’s CEO Jeff Gennette. “And as we look at the landscape today, we’re conducting additional analysis that can help inform our long-term strategy to unlock more value for Macy’s.”

Top Estimated Earnings

Under Gennette, Macy’s tried to appeal to younger consumers who might have otherwise left shopping at traditional department stores. He said Macy’s added 4.4 million new customers in the quarter and benefited from the “improved economic environment”.

Gennette also tried to allay concerns about ongoing supply chain issues, and said Macy’s does not expect to be impacted by empty shelves during the key holiday shopping season.

“We expect supply chain problems to continue into 2022,” he said. “Some categories are much better, some are better,” he said. [challenges] persistence. But I think overall, we’ve got a good handle on how we’ve mitigated that. “

Here’s how Macy’s did over the three-month period ending October 30th compared to what analysts had predicted, based on a Refinitiv survey:

  • Earnings per share: $1.23 adjusted against 31 cents expected
  • Revenue: $5.4 billion vs. $5.2 billion expected

Macy’s reported net income of $239 million, or 76 cents per share, compared with a loss of $91 million, or 29 cents a share, a year earlier. Excluding single-use items, the company earned $1.23 per share, much better than the 31 cents analysts had predicted.

Sales rose to $5.4 billion from $3.99 billion a year earlier. That number far exceeds the estimated $5.2 billion.

Macy’s reported comparable sales growth, on an ownership plus license basis, of 35.6% for the quarter. Analysts were looking for growth of 29.3%, according to Refinitiv estimates.

Digital sales up 19%

Digital sales are up 19% year over year and up 49% in two years. The company said its online business accounted for 33% of total revenue, up 10% from 2019. And 41% of new Macy’s customers used a digital device in the third quarter.

At Bloomingdale’s, comparable sales on an ownership plus license basis were up 38.5% year over year. The company says shoppers have more money to buy luxury handbags, high-end jewelry, men’s shoes and clothing.

The luxury market is hot right now, Gennette said in a phone interview. “Customers are ready to put more of their disposable income into the brand for the future.”

He said the company also expects to see a recovery in spending by international travelers when they return to the US, which should further help the company’s luxury business. The return of foreign shoppers to Macy’s stores will happen between 2022 and 2023, he said.

Gennette says the company has been successful in attracting old customers back and finding new shoppers in no time. pandemic caused by corona virus. ONE mount with Toys R Us He said he’s helped Macy’s toy sales more than double from 2019. And the company is seeing some change from competitors that have closed, according to Gennette.

Macy’s now has 2021 revenue in the $24.12 billion to $24.28 billion range, compared with a previous range of $23.55 billion to $23.95 billion.

It expects full-year adjusted earnings per share to come in at $4.57 to $4.76, up from its previous forecast of $3.41 to $3.75.

Analysts were looking for adjusted earnings per share of $3.89 on revenue of $23.78 billion.

Department store operator Kohl’s also on Thursday raise its outlook for the year, sending its shares up 10.6% on the day.

More digital marketplace

Meanwhile, Macy’s planned digital marketplace will allow third-party merchants to sell their items on Macy’s and Bloomindales’ websites. The company says it is working with technology provider Mirakl to power the platform. According to Gennette, this has been going on for at least a year.

This marketplace will help retailers expand their product range at a lower cost, says Matt Baer, ​​Macy’s Chief Digital Officer and Customer. The company has targeted $10 billion in online sales by 2023, but this market will add even more incremental sales, Baer said.

Outdoor shower bed announced earlier this month that they have plans launch a similar market to third parties to sell items on their websites. It is an impulse to imitate markets that companies like Amazon, Walmart and Target had. But it is unclear whether these retailers will be successful.

The launch of the online marketplace could only amplify calls for Macy’s to back out of its e-commerce business, according to GlobalData chief executive Neil Saunders.

“One possible risk to the market is that it will reduce the overlap between in-store and online,” says Saunders.

Jana’s founder and managing partner, Barry Rosenstein, said in an emailed statement that the operations team welcomes Macy’s latest results.

“We appreciate Macy’s strong operating results for the quarter and commend the board for timely engaging advisors to undertake a review of ways to harness the value of their operations,” he said. its powerful e-commerce business.

Jana’s interest in Macy’s stock helped boost the retailer’s stock. As of late Thursday, its shares are up more than 232% year-to-date, bringing its market value to $11.6 billion.

Find the full press release from Macy’s here. Macy’s (M) Q3 2021 earnings beat

Emma James

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