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Here's Why Macy's (M) Outpaced Its Industry in the Past 6 Months

Macy's, Inc. M is modernizing operations and using technology to boost efficiency and market responsiveness, targeting sustainable growth and a return to pre-pandemic financial levels by fiscal 2025. The retailer is enhancing its omnichannel approach by improving digital and in-store integration and expanding digital marketing. Initiatives include flexible payment options and a new digital marketplace to sustain customer spending.

Through its "A Bold New Chapter" strategy, Macy's is closing underperforming stores and expanding small-format locations to strengthen its market presence and drive brand growth. This current Zacks Rank #3 (Hold) company has outpaced the Zacks industry over the past six months. In the said period, shares of the company have gained 64.7% compared with the industry’s 33% growth.

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Let’s Delve Deeper

Macy’s commitment to leveraging technology extends to improving decision-making and operational efficiency, positioning it well to navigate the evolving retail environment. The company has projected a low-single-digit comp growth and mid-single-digit adjusted EBITDA dollar growth starting in fiscal 2025, signaling optimism toward achieving pre-pandemic free cash flow levels. Fiscal projections indicate a rise in the gross margin to 39.2-39.5% for fiscal 2024 compared with 38.8% in fiscal 2023.

Macy’s is significantly advancing its omnichannel shopping experience, refining both its digital footprint and marketing strategies. By integrating online and in-store experiences and enhancing its digital platforms, Macy’s aims to elevate the customer journey across all touchpoints. Investments in technology and digital marketing are central to its strategy, aimed at increasing customer loyalty and conversion rates through a more cohesive shopping experience.

Despite economic pressures, Macy’s has demonstrated resilience in consumer spending through strategic curation of brands and the expansion of its luxury segments like Bloomingdale's and Bluemercury. The development of small-format off-mall locations is another strategic element aimed at adapting to changing consumer behaviors and expanding Macy’s market reach, thereby boosting engagement and growth across different retail formats.

A Bold New Chapter Strategy Bodes Well

Labeling fiscal 2024 as a year of transition and investment, Macy’s is executing its “A Bold New Chapter” strategy to foster financial improvement and sustainable growth. This includes closing 150 underperforming stores by fiscal 2026 while enhancing approximately 350 remaining locations to enrich the customer experience and drive growth. The planned expansion of small-format stores, informed by detailed real estate analysis, is expected to optimize Macy’s market presence and store formats effectively.

Brand Performance and Customer Engagement

Macy’s reports that 41.2 million active customers engaged with the brand over the last 12 months, with significant growth observed in the beauty sector, particularly in fragrances and high-end cosmetics. The Bloomingdale’s brand also saw robust performance in its beauty and apparel sectors, driven by 4 million active customers. Meanwhile, the Bluemercury brand attracted about 711,000 active customers, with notable strength in skincare and cosmetics.

Further customer-focused initiatives include Macy’s partnership with Klarna, offering financial flexibility through interest-free installment payments, and a collaboration with DoorDash to expedite delivery services.

The redesign of Macy’s mobile app and the integration of multiple payment options, including Apple Pay and Venmo, alongside a digital marketplace launch, are all geared toward creating a seamless and convenient shopping environment. The “Market by Macy's” initiative, in collaboration with Mirakl, further enhances this by allowing third-party merchants to sell on Macy’s platforms, diversifying the available products and brands.

Wrapping Up

Macy’s is currently steering through a period of transformation aimed at modernizing its operations and harnessing the potential of technological innovations like Artificial Intelligence. This strategic pivot is primarily focused on optimizing the supply chain and enhancing inventory management, which are crucial steps toward improving efficiency and responsiveness to market trends. Such initiatives are foundational to Macy's vision of sustainable growth amid a highly competitive retail landscape.

Stocks to Consider

A few better-ranked stocks are American Eagle Outfitters Inc. AEO, Abercrombie & Fitch Co. ANF and Deckers Outdoor Corporation DECK.

American Eagle Outfitters is a specialty retailer of casual apparel, accessories and footwear. The company sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for American Eagle Outfitters’ current fiscal-year earnings and sales indicates growth of 12.5% and 3.3% from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.

Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently sports a Zacks Rank of 1. ANF has a trailing four-quarter average earnings surprise of 715.6%.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year earnings and sales indicates growth of 19.1% and 5.6% from the year-ago period’s reported figures.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. The company carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 38.7% and 15.9% from the year-ago period’s reported figures. DECK has a trailing four-quarter average earnings surprise of 32.1%.


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