Macy’s Reports Dismal Holiday Sales: Will Restructuring Help?
Online sales show strength
As we saw in the first part of this series, Macy’s (M) holiday season same-store sales were extremely disappointing. But the department store chain’s online sales provided some hope during the holiday season. According to a January 6, 2016, update, Macy’s online sales experienced a double-digit increase in the November–December period. The company filled ~17 million online orders at its macys.com and bloomingdales.com sites. That’s a 25% increase from the previous year.
On January 7, 2016, rival JCPenney (JCP) stated that it experienced record online sales in the 2015 holiday season.
Strong online business
According to the rankings compiled by benchmarking firm L2, Macy’s is the most digital savvy department store based on a digital IQ index of 142. JCPenney and Nordstrom (JWN) tie for second on the list with a digital IQ of 141. Kohl’s (KSS) is fourth on the list.
Department stores have been investing heavily in their digital channels to combat increasing competition from online retailers such as Amazon (AMZN). Consumers are increasingly choosing to shop online due to convenience. According to data released by the United States Census Bureau on November 17, 2015, US e-commerce or online sales increased by 15.1% to $87.5 billion in 3Q15 from the comparable quarter of the previous year. E-commerce sales accounted for 7.4% of US retail sales in 3Q15, up from 6.5% in 3Q14.
Initiatives to enhance online business
Macy’s and its peers have taken several initiatives to enhance their online sales. These include expansion of the online product assortment, the buy-online-pickup-from-store feature, improvement in site functionality, and enhancement of fulfillment capacity. The iShares Russell Mid-Cap ETF (IWR) has 0.2% exposure to Macy’s.
In an update on JCPenney’s holiday season, Marvin R. Ellison, chief executive officer of JCPenney, stated that the company’s omnichannel capabilities facilitated its supply chain network to process millions of online orders in the 2015 holiday season. The company’s online deliveries were supported by the inventory of 250 stores nationwide. JCPenney also mentioned a rise in the number of consumers who used the buy-online-pickup-in-store feature at more than 1,000 JCPenney stores nationwide.
Despite Macy’s strong online sales, a decline in its holiday season same-store sales made the company lower its guidance for 4Q15 and fiscal 2015.
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