Yahoo Finance Can Macy’s Strategic Actions Translate into Improved Sales?
Macy’s Stock Falls 15% on Dismal 1Q16 Results and Sinking Outlook
Weakness in same-store sales
Macy’s (M) same-store sales fell by 6.1% in 1Q16 ended April 30, 2016. Macy’s same-store sales performance is worsening with each quarter. The decline in 1Q16 was higher compared to a same-store sales decline of 4.8% and 0.7% in 4Q15 and 1Q15, respectively.
Same-store sales is a key performance metric for retailers. It indicates the change in sales generated from the existing stores of a retailer, excluding the impact of stores opened and closed over a certain period. In the press release for its 1Q16 results, Macy’s highlighted some initiatives to improve its sales.
Growth areas
Macy’s indicated that it will accelerate initiatives that are receiving positive responses. This includes the company’s jewelry pilot, Macy’s Backstage store-within-store, beauty businesses including Bluemercury, activewear, and its Last Act clearance section.
Macy’s is rolling out its upgraded jewelry department concept to more than 350 stores by the end of 2016. The company had piloted this concept in 40 stores in the fall of 2015.
Macy’s will also continue the rollout of the in-store pilots of its off-price Macy’s Backstage concept. The company has already opened six Backstage store-within-stores and plans to open nine more by 4Q16. In the 1Q16 conference call, Karen Hoguet, Macy’s chief financial officer, stated that the company could roll out Backstage in-stores in about 200 to 300 of its Macy’s stores if the strategy works favorably.
Macy’s marked its debut in the off-price space in 2015 with its freestanding Macy’s Backstage stores. Kohl’s (KSS) also opened its first off-price concept store Off Aisle in 2015. Nordstrom (JWN) already has a considerable presence in the off-price space through its Nordstrom Rack stores. Department stores are looking for growth opportunities in off-price retailing as consumers continue to look for bargain deals in the off-price stores of established players like TJX Companies (TJX) and Ross Stores (ROST). Macy’s, TJX Companies, and Ross Stores constitute 3.6% of the Consumer Discretionary Select Sector SPDR Fund (XLY).
The Bluemercury beauty business is also a key priority for Macy’s. The company has already opened five in-store Bluemercury shops and expects to open 22 such stores by 4Q16.
Enhancing merchandise assortment
Macy’s strategic actions to improve sales also include enhancement of its merchandise offerings to attract more customers. The company’s new product launches include Love Bravery, a clothing and accessories line supported by Sir Elton John and Lady Gaga.
We’ll discuss the impact of the company’s 1Q16 results on its stock price in the next part of this series.
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