Macy’s report beat expectation, but is still showing the effects of consumer slowdown in spending. The company reported third quarter 2023 diluted earnings per share of $0.15 compared to $0.35 in the third quarter of 2022. Net sales declined 7% as did digital sales. Net sales were down 7.6% on owned and licensed basis compared to last year. Bloomingdale’s sales were down 3.2% on an owned basis and down 4.4% on an owned and licensed basis.
Hail and Farewell – It was an unusual analyst meeting. The current chairman, Jeff Gennette said his farewell, Tony Spring hinted at changes that the company was preparing. The change of management has been set for the end of the fiscal Year, which this year includes an extra week. The year will end February 4, 2024. It was a dry-eyed farewell for Gennette, with many analysts wishing him well before they asked their question. It was clear that management has been working on plans to tighten the operation, ensure greater profitability and take advantage of buying best-selling merchandise at the last minute since the company does have strong cash flow.
Hail and Welcome – Tony Spring, the President and CEO in-waiting, gave a good account of the company’s present status. He pointed out that Macy’s has 40 million customers annually, 4 million customers at Bloomingdale’s and almost 1 million customers at bluemercury. Between the three nameplates the company offers a range of price points from off-price to luxury. He sees improvement in the gift-giving assortment in Beauty and Fragrances as well as the expansion of Cosmetics and Cashmere. He also points to the expansion of toys under the “Toys “R” Us” banner as an important attraction for families.
The Strong Controls of Adrian Mitchell – Adrian joined Macy’s three years ago as CFO and now has been promoted to Executive Vice President, Chief Operating Officer and he continues as Chief Financial Officer. That is quite an assignment, since both pyramids require a lot of attention, especially during and after the pandemic. Costs of transportation had soared and is now rapidly coming down, giving the company the benefit of lower operating costs. He will be very busy installing new controls.
The opportunities for Macy’s growth are manifold. Management pointed to the small stores as a great opportunity. There are 3 small units that opened for Bloomingdale’s and Tony Spring reported that sales were great in the Seattle store that just opened. Macy’s has 12 mini-stores and plans to open 30 by 2025. While some participants are not sure of the success of the Macy-mini’s, one has to see where, when and how the first stores will open. Mini stores must have a well curated selection of Macy’s merchandise. Most of the mini’s will be about 50,000 square feet in size, about one-fifth of a typical Macy’s store. (That is our estimate based on the Bloomie openings.)
Postscript: Farewell Jeff: Your stewardship of Macy’s as CEO was for 7 years. It spanned the pandemic and presented challenges that were unexpected. You had to close stores, lay-off associates and make decisions few CEO’s had to face. I wish you well in your future.