Dive Brief:
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Macy’s Inc.’s Q3 net sales were essentially flat year over year, edging down slightly to $4.7 billion. In the strongest growth in 13 quarters, comps rose 3.2%, including licensed and marketplace sales.
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At namesake Macy’s, net sales fell 2.3%, but comps rose 2%; comps at stores slated to remain open rose 2.3%, and at revamped stores rose 2.7%. At Bloomingdale’s, net sales rose 8.6%, with comps up 9%. At Bluemercury, net sales rose 3.8%, with comps up 1.1%.
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Gross margin declined 20 basis points to 39.4%, mostly due to a 50-basis-point tariff hit. Net income plunged over 60% to $11 million, the company reported Wednesday.
Dive Insight:
Along with its strong comparable sales showing, Macy’s achieved its highest Q3 net promoter score, which CEO Tony Spring called “one of the best ways to measure progress.”
But he also shared a customer email — he said he reads them all for “another valuable form of feedback” — from a shopper in Clearwater, Florida, who was looking for his first suit at Macy’s. The associate there showed the customer how to wear the suit, how to carry himself “and even shared some encouraging words,” Spring said.
“He wrote, quote, ‘Your colleague Andrew had me outfitted, not just with clothes, but with confidence,’” he read. “’He treated me with patience, kindness and professionalism as he was helping me.’”
This reflects a much-needed return to customer service and visual merchandising standards, as recorded in GlobalData research, including channel checks. This is “enticing customers to buy more” and regaining some trade, according to emailed comments from GlobalData Managing Director Neil Saunders
“It used to be the case that Macy’s presented the customer with a jumble of product that they had to sort and sift through,” he said. “Nowadays, Macy’s is increasingly giving the customer ideas and inspiration through things like outfit suggestions and more curated assortments.”
In fact, Fitch Ratings Senior Director David Silverman believes Macy’s could be gaining sales from rivals.
“The company’s efforts to improve merchandising and service appear to be gaining traction, as the company sees somewhat accelerating topline results despite a choppy environment and ongoing challenges at regional malls,” Silverman said in emailed comments. “Fitch believes the company continues to benefit from its fundamental strengths including its scale, vendor relationships and good financial position, and is likely taking some share from weaker players in the department store and softlines space.”
Despite the progress, which beat expectations, Macy’s is keeping a conservative outlook. The company raised its full-year guidance slightly, saying it expects consumers to stay careful in Q4 and assumes tariffs will remain.
Macy’s Inc. now expects net sales to reach between $21.5 billion and $21.6 billion, up from its previous expectation for between $21.2 billion and $21.5 billion. Comps are expected to be flat to up 0.5%, better than the previous outlook for a decline of 0.5% to 1.5%. At Macy’s stores slated to remain open, including licensed and marketplace sales, comps are expected to be flat to up 1%, compared to the previous outlook for flat to down 1.5%.
Silverman views this as “an appropriately cautious tone.”
“The holiday shopping season has just begun, and the trajectories of sales and promotional cadence over the coming weeks are uncertain,” Silverman said. “However, Fitch expects Macy’s has the tools to navigate this environment, providing the opportunity to improve its longer term positioning particularly given potential competitive fallout elsewhere.”
