Macy’s reported a weak 4th quarter 2022 but management comments reflected a determined attitude to manage through these difficult times, attract more customers, and restore positive momentum.
Sales in the 4th quarter 2022 were $8.3 billion, down -4.6% from last year’s $8.7 billion. Comparable store sales decreased -3.3% on an owned basis and -2.7% on an owned plus-licensed basis versus last year. Digital sales decreased -9% versus last year’s 4th quarter. Bloomingdale’s comparable store sales were up +1.2% on an owned basis and up +0.6% on an owned-plus-licensed basis. Blue mercury comparable store sales were up +7.2% on an owned basis.
Net income for the fourth quarter 2022 was $508 million compared to $742 million in fiscal 2021. Diluted earnings per shares in 2022 were $1.83 per share compared to $2.44 in fiscal 2021.
Full year fiscal 2022 diluted earnings per share were $4.10 compared to 2021 diluted earnings per share of $4.55. Net sales were $24.4 billion, down slightly, (just -0.1%) versus reported 2021 sales of $24.5 billion.
The company reported that 42.7 million active customers shopped the Macy’s brand; that is a -4% decrease compared to the prior year. However, Bloomingdale’s had 4.1 million customers that shopped the Bloomingdale’s brand, a +5% increase compared to the prior year. Approximately 662,000 active consumers shopped the Bluemercury stores, a +12% increase compared to last year.
Throughout this time, Macy’s had tight controls in place to manage a very difficult sales period. In the face of inflationary pressures on merchandise and consumer apathy for shopping because of many lay-offs, Macy’s took action to tighten inventory; that was laudable. The company reduced inventory by about 4% versus last year. Inventory productivity was driven by disciplined inventory management that combined strategic use of data analysis, alignment of the merchandise team, and the successful integration and modernization of Macy’s supply chain. That inventory strategy will certainly benefit the company’s performance in the coming months, since low inventory levels give the buying teams an opportunity to buy more if a best seller appears or add to classifications that are in demand. Tight inventory control also assures that merchandise on the selling floor is fresh, crisp, and attractive. Buyers are usually optimists; they see great opportunities for growth – sometimes too often – so these tight controls provide a good counter balance.
Macy’s is swinging to private brands. The new chief merchandising officer has made it one of her top priorities. There is now a private brand team developing new designs and sourcing that will differentiate the private brand portfolio. Private brands already account for about 16% of Macy’s sales, and the goal is for these new efforts to follow the success of INC (which had an increase in the 4th quarter of +28% versus last year). A recently completed up-date on the INC brand worked.
Another anticipated growth factor will be the mini-stores Macy’s and Bloomingdale’s have introduced. They average 30,000 to 40,000 square feet in size. There are now 8 Market by Macy’s and two Bloomie’s. This year here will be 5 more Market by Macy’s units and one new Bloomie’s location. Jeff Gennette praised the stores, their neatness, and the positive experiences they deliver to customers.
Jeff Gennette, Chairman and CEO of Macy’s Inc., summed up the fourth quarter saying, ”We successfully navigated 2022 from a position of financial and operational strength. Despite an increasingly volatile macroeconomic climate, through the ongoing execution of our Polaris strategy, we remained agile, pivoted to meet customer demand and elevated our approach to inventory management. In the fourth quarter, we benefitted from our disciplined inventory approach and compelling gift-giving strategy, which allowed us to provide fresh fashion and style of great values for all our customers”.
POSTSCRIPT: Macy’s tight control paid off. Sales and earnings were above expectations. Management has indicated that 2023 will be a 53-week year. This happens every six or seven years. With that in mind, management expects 2023 comparable sales to be $23.7 to $24.2 billion and adjusted earnings per share to range between $3.67 and $4.11. Management clearly indicated that the first half will be weaker and the second half of the year stronger. Hopefully the environment will allow that growth.