FINANCE

Macy’s Q3 earnings beat Street; raises forecast

BY Marianne Wilson

A resurgent Macy’s has high hopes for the fourth quarter.

The department store giant on Wednesday raised its annual forecast on the heels of a strong third quarter that included its fourth consecutive quarter of comp-sales growth and amid high hopes for the holiday shopping season.

“The holiday season is when Macy’s truly shines,” said Jeff Gennette, Macy’s chairman and CEO. “We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter.”

Macy’s net income totaled $62 million, or 20 cents per share, for the quarter ended Nov. 3, up from $30 million, or 10 cents per share, last year. Adjusted earnings per share was 27 cents, ahead of the 15 cents analysts had expected.

Revenue rose to $5.40 billion, in line with the Street, from $5.28 billion the previous year. Total same-store sales rose 3.3%, higher than analysts had expected. It was the company’s fourth consecutive quarter of comp-sales growth.

Macy’s has been working overtime to enhance its in-store shopping experience, from partnering with Facebook to bring in nearly 150 online brands to its pop-up concept, The Market @ Macy’s to carving out space in its existing stores for its off-price Backstage concept. It also is rolling out virtual reality technology to help customers to boost customer confidence in furniture purchases.

“Our strategic initiatives are gaining momentum and delivering results,” said Gennette. “We have the right merchandise, the right marketing and the right customer experiences in place to deliver a strong fourth quarter “Another double-digit quarter from our digital business and a strong stores performance combined to help us exceed expectations. We continue to see an improved trend in brick and mortar across the fleet with particularly strong results from our Growth50 stores.”

Analyst Neil Saunders, managing director of GlobalData Retail, commented that consumer sentiment towards Macy’s has definitely improved, and that the firm’s consumer tracking data also supports the story of an ongoing recovery.

“Our data also show that for the first time in over eight years, the number of people saying they will visit Macy’s to do holiday shopping has risen,” he said. “Along with the good sales numbers, these pieces of evidence underline that Macy’s is succeeding in creating a stronger appeal.” For more of Saunders’ commentary, click here.

For the full year, Macy’s said it now expects earnings per share to fall within a range of $4.10 to $4.30, up from $3.95 to $4.15. It also narrowed its forecast for same-stores sales to climb between 2.3% and 2.5%, compared with a prior range of 2.1% to 2.5%. Estimates for net sales narrowed to an expected increase of between 0.3% to 0.7%, compared to the previously estimated flat 0.7%.

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