Macy’s put up its sixth consecutive quarter of increases in comparable store sales fueled by its robust online business.
The department store chain also smashed estimates for first quarter profits.
Shares rose in premarket trading on Wednesday.
Macy’s report offered encouraging news after the department store chain struggled through a weak holiday season. It offered signs that its retooling of its loyalty program and its expansion of its off-price concept are enticing shoppers to buy. The company also delivered another quarter of double digit increases in online sales.
A strong economy and Macy’s reinvention efforts have helped produce a string of quarterly increases at established stores after a three year sales slump. But that momentum was fizzling. Moreover, escalating trade wars with China could now create big challenges for department stores and other general merchandise retailers.
The proposed list of about $300 billion of Chinese goods that face new duties of at least 25% includes items like clothing as well as home goods and toys. That would force Macy’ and others to either absorb the costs or raise prices.
Macy’s, like many other mall-based stores, is under pressure to reinvent itself as shoppers increasingly buy online. Macy’s has been expanding its store labels and opening more off-price Backstage stores. It’s rolled out technology that allows customers to skip the line at the register. It’s also expanding virtual reality technology in furniture and cosmetics sections. The company’s revamped loyalty card program has helped keep its best customers engaged. And after closing more than 100 stores over the past several years, it’s going to see how a cluster of smaller stores work with today’s customers.
In February, the department store announced a multiyear money-saving restructuring program that it says will shrink its management structure and make the department store more nimble in a fiercely competitive environment. The plan would result in annual cost savings of $100 million and include the elimination of 100 vice president positions
Mobile is Macy’s fastest growing channel, with more than $1 billion in sales through its apps alone in 2018, the retailer has said. The company also plans to further invest in areas where it already has strong market share. That means dresses, fine jewelry, big ticket, men’s tailored clothing, women’s shoes and beauty. And a year after buying startup Story, Macy’s is bringing the retail concept to life in 36 stores in 15 states including its Manhattan flagship. The concept, which curates merchandise around a theme and rotates every two months, comes at a time when department stores like Macy’s are trying to rethink how to better excite shoppers who are increasingly going online.
Such efforts propped up sales results. The Cincinnati department store chain reported a first quarter profit of $136 million, or 44 cents per share. That far exceeds Wall Street’s per-share expectations of 31 cents, according to a survey by Zacks Investment Research.
Revenue was $5.5 billion, just shy of expectations.
Sales at stores opened at least a year rose 0.7%. That included business from licensed departments. Analysts were expecting a slight decline.
Macy’s stuck to its full year earnings projections of between $3.05 and $3.25 per share, about in line with expectations.
Shares rose 3%, or 78 cents, to $22.60 per share in premarket trading.