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Macy's (M) Online Platform Continues to Gain Amid Pandemic Woes

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Zacks Equity Research
·4 min read
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While the coronavirus pandemic has daunted brick-and-mortar store traffic, surge in online shopping provided relief to most retailers. Macy's, Inc. M is no exception to such trends. While the company’s store sales are gravely impacted by pandemic-led disruptions, matters on its digital front are quite encouraging. Moreover, the company is gaining from efforts to boost assortments and operating efficiency. Let’s take a closer look.

Online Platform Gains Prominence

The pandemic-led social distancing norms and safety concerns are compelling consumers to reduce store trips and incline more toward online purchasing. This was well exemplified in Macy's third-quarter fiscal 2020 results, wherein digital sales surged 27% year on year and contributed 38% to total-owned comparable sales.  Digital penetration stood at 38%, up approximately 14 percentage points year over year. Management was pleased with growth witnessed across all metrics including search, traffic and conversion. Also, customers responded well toward the company’s expanded omni-channel offerings such as curbside, store pickup and same-day delivery.

We note that the company has been constantly striving to improve its mobile and website features to deliver enhanced shopping experience. Markedly, collaboration with Swedish buy-now, pay-later group Klarna is enabling the company to offer online shoppers financial ease and payment flexibility. Also the tie-up with DoorDash for expediting delivery service is likely to yield. These apart, Macy’s has  a lot more to offer for its online consumers in the form of Macy’s Star Rewards, Macy’s Gift Cards, experts’ help and other options. These actions are expected to help deliver a seamless online shopping experience to customers this holiday season.

Other Strategic Growth Efforts

Macy’s is expanding brand offerings to support customer self-expression at all price points. Based on the current market trends, the company is focusing on product areas like fine jewelry, beauty, furniture and mattresses as well as Backstage off-price. Additionally, it is optimizing inventory across all channels. It has also been taking actions across stores for reducing bottleneck and control occupancy levels.  Such growth endeavors are part of the company’s three-year Polaris Strategy. The company had earlier highlighted that Polaris strategy will help attain gross savings of nearly $2.1 billion by 2022.

Grim Store Sales Remains a Worry

The coronavirus outbreak has significantly hindered Macy’s store performance. During third-quarter fiscal 2020, store sales declined 36% year on year. Although the company has reopened its stores, they are yet to depict considerable growth. Management is cautious regarding uncertainties associated with the ongoing pandemic and its impact on store sales, especially in urban areas. Additionally, the company expects international tourism sales to remain soft.

Wrapping Up

While store sales is yet to pick up pace, Macy’s well-chalked strategic initiatives to boost digital offerings is worth applauding. Apart from these, efforts to boost assortments and reduce costs are likely to continue supporting this Zacks Rank #3 (Hold) company in the forthcoming periods. Shares of the company have surged 53.8% in the past three months compared with the industry’s rise of 70.2%.

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