Macy’s Launching Initiatives To Reverse Sales, Earnings Trends

On a busy Wednesday, August 12, for the company, Macy’s, Inc. delivered what it described as disappointing results for the second quarter along with updates on efforts to grow profitable sales on a short-term and long-term basis. At the same time, the retailer announced initiatives close to home and overseas designed to further bolster business.

Macy’s posted net income of $217 million, or 64 cents per diluted share, for the second quarter of 2015 versus $292 million, or 80 cents per diluted share, in the 2014 period.

Second quarter sales totaled $6.1 billion, down 2.6% from the period last year as comparable sales for owned and licensed stores slipped by 1.5%. Comps for company-owned stores slid by 2.1%.

“We are disappointed in our second quarter results, which were impacted by a variety of factors, both internal to the company and in the macroeconomic environment,” said Terry Lundgren, Macy’s chairman and CEO, in announcing the financial results.

He went on to state, “In the second quarter, we removed a major Friends & Family promotional event from Macy’s calendar. In addition, as a result of the previous port slowdown, planned markdowns in many departments were delayed into the second quarter to clear merchandise that arrived late. Moreover, throughout the first half of the year, overall consumer demand has been restrained in many of the categories of merchandise we sell, and the strong U.S. dollar has led to significantly lower international tourist spending. We expect an improvement in trend beginning in the second half of 2015 based on a range of promising new strategic initiatives, including those initially announced in January, which we believe will transform our company in the years ahead.”

Omnichannel Expansion 

Among the growth efforts Macy’s cited was strengthening of the company’s online business through integrated omnichannel merchandise planning and buying, as well as more strategic placement of inventories in stores and online fulfillment centers. Macys has expanded markets for same day delivery as well as setting up nationwide buy online pick up in store to provide Macy’s and Bloomingdale’s customers more purchase options. In addition, the retailer is developing the first six Macy’s Backstage off-price stores in metro New York City, with a debut set for September. Macy’s expects all to be up and running for the holiday season.

Macy’s is also rolling out 10 more Bluemercury freestanding specialty beauty and spa locations, which should be operating by the end of the year, bringing the store count to 76. Four Bluemercury stores within Macy’s locations will open this fall. The company said that Bluemercury is using its omnichannel and digital expertise to improve its e-commerce offering and drive online sales.

China E-Commerce Joint Venture

Among the other initiatives that Macy’s announced today is a deal to initiate e-commerce selling in China during the fall through a joint venture with Fung Retailing Limited. The 65% Macy’s owned joint venture will begin selling on the Alibaba Group’s Tmall Global in late 2015 under the joint agreement, Macy’s related.

Brooklyn Real Estate Deal

Finally, Macy’s announced that it would sell property in downtown Brooklyn to Tishman Speyer in a deal worth $270 million to take advantage of the real estate’s inherent value. The funds, starting with $170 million initially, with the rest to be paid over three years, will offset the cost of Macy’s remodeling its store on the property while the developer adds office space to the building.

Macy’s will reconfigure the retail operation, move out a photo studio and reduce store space to 310,000 square feet from 378,000 square feet to make it more productive and easier for customers to navigate, the company stated. It also provides Macy’s with the chance to fine tune the location and meet the needs and preferences of what it called one of New York City’s most dynamic neighborhoods.