Macy's Shows Signs of Life After Prolonged Slump – Wall Street Journal

This article was originally published on this site

A Macy’s Backstage Store grand opening at Macy’s in the Newpark Mall last month in Newark, Calif.


Photo:

Peter Barreras/Associated Press

After closing dozens of unprofitable stores,

Macy’s
Inc.

M 10.84%

reported higher sales at those locations still open amid the first signs that the department store giant is pulling out of a prolonged slump.

The results were buoyed by a strong economy, with low unemployment and recent tax cuts that should give consumers more money to spend. They bode well for other retailers scheduled to report earnings this week, including

Walmart
Inc.,

WMT 1.65%

J.C. Penney
Co.

JCP 4.98%

and

Nordstrom
Inc.

JWN 1.91%

“The customer is feeling confident, and is out there ready to spend,” said Macy’s Chief Executive

Jeff Gennette.

Macy’s said same-store sales rose 3.9% compared with the same quarter the year before, and 4.2%, including licensed departments. A big driver of the sales increase was a promotional event that shifted into this year’s first quarter, compared with last year, when it occurred during the second quarter. Stripping out this event, same-store sales on an owned plus licensed basis would have risen 1.7%, according to

Neil Saunders,

managing director of GlobalData Retail, a research firm.

Related Video

The retail industry is undergoing another major shift — to e-commerce. How did we get here? Photo: Associated Press

Read More

  • Heard on the Street: Macy’s: A Miracle on 34th Street?

But Macy’s is also taking internal steps that are boosting performance, including a streamlined merchandising structure and new incentive plan that lets all full-and-part time staff share in the gains based on local store and corporate performance. “We’re moving better and faster than ever before,” Mr. Gennette said.

Shares in Macy’s shot up nearly 9% in morning trading Wednesday after the retailer reported same-store sales growth that widely surpassed analysts’ estimates and raised its projections for the year.

Macy’s said it now expects to earn between $3.75 and $3.95 a share on an adjusted basis, a range 20 cents higher than its prior guidance. The company also raised the prospects of seeing annual sales growth. The department-store chain now expects annual sales to be in a range of down 1% to up 0.5% from its prior forecast of sales falling between 0.5% and 2%.

Macy’s revenue rose 3.6% to $5.54 billion.

Profit climbed 78% to $139 million, or 45 cents a share. On an adjusted basis, the company earned 48 cents a share.

Macy’s had less excess inventory to clear in the period, and customers also spent more on full-priced goods. That helped the average ticket price rise 5%, according to the company. The retailer also benefited from a rebound in spending by international tourists after they pulled back in recent years due to the strong dollar.

Mr. Gennette said Macy’s was getting traction from revamped shoe and fine jewelry departments as well as a new loyalty program that offers tiered rewards based on spending. It is also adding new categories to its website through its vendor direct program such as drones and decorative home goods.

Mr. Gennette also pointed to the rollout out of Macy’s Backstage, the company’s discount concept, as helping to buoy sales. In the first quarter, Macy’s opened about 20 of these stores. It had planned to open 100 this fiscal year.

The company also said earlier this month it bought a New York City concept store called STORY which changes up what it is selling and its design every four to eight weeks. Macy’s also said that STORY’s CEO and founder Rachel Shechtman will become a brand experience officer at Macy’s.

Mr. Gennette said another new hire, former

eBay
Inc.

executive

Hal Lawton,

was helping to give the company more operational discipline and better marry technology with the store experience. One initiative is the rollout of mobile checkout to all stores this year.

Separately, Macy’s said it has ended its joint venture with Fung Retailing Ltd. in China, but would remain on Alibaba’s TMall platform.

Macy’s is also in line for a new chief financial officer. In early April, the company said CFO

Karen Hoguet

will retire. She will remain CFO until a new executive is appointed to take over her role, but she will stay as an adviser until February. Macy’s has hired a search firm to help look for a new CFO.

Write to Suzanne Kapner at Suzanne.Kapner@wsj.com and Allison Prang at allison.prang@wsj.com