An embolden Tony Spring, Chairman and CEO of Macy’s, clearly defined the future by indicating that he was encouraged by the consumer’s response to Macy’s bold New Chapter strategy. In the first quarter it resulted in results near the high-end of expectation.
“Our team executed with discipline and efficiency” said Tony Spring “It contributed to first quarter earnings that exceeded our expectations. At the Macy’s nameplate go-forward business performance was led by our First 50 locations, which achieved comparable sales growth year over year and are a leading indicator for our go-forward fleet. Although early days, our investment in product presentation and experience are gaining traction and reinforce our belief that longer-term, Macy’s can return to sustainable, profitable growth.”
During the traditional analyst call, Tony reflected on the uncertain economic environment that is affecting the consumer’s mood for spending. Diluted earnings per share was $0.22 and adjusted diluted earnings per share was $0.27. This compared to last year’s $0.55 and $0.56 respectively. The reason was that the company took heavy markdowns on old-age private label merchandise.
Private label merchandise as a percent to total sales is about 15% and Tony hopes that new private label merchandise may achieve 20% of total sales. That will add to profitability, since private label merchandise, which is usually exclusive with the store group, has a higher profit margin.
Net sales were $4.8 billion, down 2.7% from last year.
Macy’s comparable sales were down 1.2% on an owned basis and down 0.3% on an owned and licensed basis. The go-forward locations were down 1.3% and flat on an owned and licensed basis. Encouraging was the fact that the first 50 locations comparable sales were up 3.3% and 3.4% and owned and licensed basis. That is encouraging since the non-first 50 store group was down 1.2% on an owned and 1.3% on an owned-plus-licensed basis.
Management has clear signs that adding Donna Karen, Karl Lagerfeld, Hugo Boss, Free People and other brands to the ready to-wear-assortment has added interest ad will result in better ready to wear sales.
Gross margin was down to 39.2% while inventory was up 1.7%. The infusion of new brands and the fact that old merchandise is being disposed certainly make these figures worrisome. However, warmer weather should help the momentum of sales.
The company made slight positive adjustment in the earnings forecast. It now expects adjusted earnings of $2.55 to $2.90 in the second quarter.
POSTSCRIPT: With warn weather in sight it is likely Macy’s will report stronger sales in the second quarter. Tony Spring is an excellent leader and spokesman for Macy’s and with his motivating the associates he will return the company to greater profits. The company announced the closure of 300 stores at the last meeting. It is a good decision.
Read the full article here