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Cincinnati – Macy’s Inc.’s fourth quarter proved lackluster, as net income fell despite measured increases in sales and comps during holiday selling period.
Karen Hoguet, cfo, noted that while the company felt it performed well against its competition, “We did not achieve our original expectations.”
For the fourth quarter, net income fell 2.2% to $793 million while earnings per share increased 4.6% to $2.26. Total sales inched up 1.8% to $9.36 billion, and comps were up 2.5% on an owned-plus-licensed basis and 2.0% on an owned basis.
For fiscal 2014, net income rose 2.7% to $1.53 billion and EPS was up 9% to $4.22. Total sales were essentially flat – up just 0.6% to $28.1 billion, and comps increased 1.4% on an owned-plus-licensed basis and 0.7% on an owned basis for the year.
Hoguet said during this morning’s quarterly conference call that in this new fiscal year the company is grasping “the opportunity to take Macy’s to whole new level of success.”
She continued: “We have the ability to create a larger relationship with our existing customers and make inroads with customers who have not traditionally shopped Macy’s or Bloomingdale’s.”
Chairman and ceo Terry Lundgren pointed out earlier strategies that laid the groundwork for new efforts in 2015. “We expect some of these new activities to enter start-up phases later in 2015, and we remain committed to succeeding in a test-and-learn environment where the best and most promising ideas can be ramped up quickly.”
With competition more acute than ever, Macy’s is turning its focus this year on new online and in-store concepts.
One key example is the introduction of an off-price model for Macy’s.
“In the outlet world, we have Bloomindale’s…and we’re expanding on that concept,” Hoguet said. “We don’t want to have competition between the two [Macy’s and Bloomingdale’s], directly. But we have advantages in off-price – marketing prowess, the way we run our stores, our relationships with our vendors, our private brands, on and on…We think it may help bring a whole new customer to Macy’s.”
Hoguet cited success with its Bloomingdale’s outlets as a catalyst for encouragement with its plans to develop and roll out a Macy’s Outlet pilot this year.
“One of the things we found with our Bloomingdale’s outlet business, initially we were nervous about putting them too close to a Bloomingdale’s store,” she said. “And what we found is it served as an entry point for the customer. Instead of taking business away from the base Bloomingdale’s store, we actually brought in new customers who learned and got comfortable with Bloomingdale’s experience and then went to the Macy’s store. It’s very possible we can find that with Macy’s as well.”
Looking ahead, Macy’s offered its guidance, which includes impacts it expects from disruptions at U.S. ports from recent strikes is
“At yearend we were not experiencing a problem from the West Coast port slowdown,” Hoguet noted. “Since then, however, our inventory levels have been negatively impacted, particularly in apparel and accessories.”
She continued: “Approximately 12% of our first-quarter merchandise receipts are being delayed, and this will have some impact on our sales, gross margin and expense in the first few months of the year.
But we have incorporated our expectations into the guidance we provide today.”
On the real estate front for 2015, the company expects to open a new Macy’s store in Ponce, Puerto Rico, and a Bloomingdale’s in Honolulu.
Additionally, in fiscal 2016 a new Macy’s store has been announced for Kapolei, Hawaii, along with a replacement Macy’s store in Los Angeles. New locations for 2017 include new Macy’s and Bloomingdale’s in Miami and a new Bloomingdale’s in San Jose, Calif. Internationally, new Macy’s and Bloomingdale’s stores planned for Abu Dhabi, United Arab Emirates, in 2018 under license agreements with Al Tayer Group.
