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Macy's (M) Gains From Online Growth, Polaris Strategy On-Track

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Zacks Equity Research
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Amid a difficult retail landscape, thanks to the coronavirus pandemic, few companies such as Macy's, Inc. M have managed to stay afloat on growth in the digital realm. Moreover, this well-known retailer of a wide range of consumer goods has been gaining from efforts undertaken as part of the Polaris Strategy. The strategy includes rationalizing store base, revamping assortments as well as managing costs prudently. Let’s delve deeper.

Strong Digital Wing

Macy’s digital platform has continued to remain a healthy business component. During the fourth quarter of fiscal 2020, the company’s digital sales surged 21% from the year-ago quarter’s figure and contributed 44% to net sales. Nearly 25% of online sales were generated from stores, including curbside pickup and same-day delivery. Management stated that the company’s investments in digital innovation yielded in the reported quarter. Moreover, management extended the availability of online assortments.

Markedly, customers have been responding well toward the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery. In this respect, its tie-up with DoorDash for expediting delivery service is encouraging. The company also collaborated with Sweden-based buy-now, pay-later group — Klarna — for offering online shoppers financial ease and payment flexibility. Additionally, the company is constantly improving its mobile and website features to deliver enhanced shopping experience. These apart, the company has a lot more to offer for online consumers in the form of Macy’s Star Rewards, Macy’s Gift Cards, experts’ help and other options. The company anticipates online sales to reach nearly $10 billion by fiscal 2023.

Other Prudent Growth Efforts

Macy's is on track with its three-year Polaris strategy, which focuses on strengthening customer relationships, expanding assortments, accelerating digital growth, optimizing store portfolio and reducing costs. In respect of cost management, the company expects that the Polaris strategy will help it attain gross savings of nearly $2.1 billion by 2022. Additionally, the company is on track with expanding brand offerings to support customer self-expression at all price points. The company is investing in areas where it has strong foothold, and these include dresses, fine jewelry, fragrances, men’s tailored, women's shoes and beauty.

Moreover, its expanded Star Rewards Loyalty program, which was initiated in 2018, has been aiding better customer engagement. Apart from these, Macy’s is evaluating its store portfolio. The company is on track with its plans to shutter nearly 125 stores in lower tier malls within three years that are least productive, while upgrading the rest. The company is also committed toward boosting supply chain and technology infrastructure. To top these, its focus on price optimization, inventory management and private label offering is helping it meet customer-oriented demand as well as enhance in-store shopping experience.

Clearly, Macy’s prudent operating strategies keeps it well positioned for growth in the forthcoming periods. Shares of this Zacks Rank #3 (Hold) company have surged 84.7% in the past three months compared with the industry’s 71.1% rally.

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