Can Macy’s Strategic Initiatives Save Its Fiscal 1Q16 Sales?
Can Macy’s Strategic Initiatives Save Fiscal 1Q16?
1Q16 sales expectations
Macy’s (M) is slated to report its results for the first quarter of fiscal 2016 on May 11, 2016. Analysts expect Macy’s to deliver net sales of about $6.0 billion for 1Q16, which ended April 30, 2016. The analysts’ sales estimate indicates an expected decline of 4.3% in 1Q16 sales.
In the guidance issued in February 2016, Macy’s said it expects total sales in fiscal 2016 to decline by ~2%. This reflects the impact of the 40 stores the company closed in 2015. Analysts currently expect Macy’s fiscal 2016 sales to decline by 2.1%.
Recap of past performance
Macy’s missed analysts’ sales estimates in three of the four quarters in fiscal 2015, which ended January 30, 2016. Macy’s sales in fiscal 2015 declined 3.7% for several reasons, including unfavorable weather in several regions and a decline in spending in key stores by international tourists. In terms of merchandise categories, the company experienced strong sales in active apparel, cosmetics and fragrances, and furniture and mattresses. Categories that didn’t perform well in fiscal 2015 included fashion watches, cold weather items, and the housewares and tabletop businesses.
Macy’s peers Nordstrom (JWN), Kohl’s (KSS), and Dillard’s (DDS) delivered sales of 6.9%, 1%, and -0.4%, respectively, in fiscal 2015. The First Trust Consumer Discretionary AlphaDEX ETF (FXD) has 0.7% exposure to Macy’s.
Strategic initiatives
Macy’s has been implementing several initiatives to improve its sales:
focus on its fine jewelry business by enhancing product offerings and increasing associate availability
expand the off-price business by opening six Macy’s Backstage stores in fiscal 2015 – The company plans to open one more free-standing Backstage store in fiscal 2016 and test the idea of opening Backstage stores in 15 Macy’s locations.
accelerate sales growth in the company’s top 150 locations by focusing on service, products, and presentation
expand the company’s Bluemercury beauty business
focus on mobile business, the fastest growing digital channel
Despite its initiatives, Macy’s has been struggling to improve its sales due to an uncertain retail environment and growing competition from online and off-price retailers.
We’ll take a look at Macy’s margins in the next part of this series.
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