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Macy’s Inc. is a digital-first company.
That’s according to CEO Jeff Gennette who, during a call with investors today to discuss the company’s fourth-quarter earnings results, touted the department store’s turnaround progress, which he said was boosted by a series of digital-first strategies. The company’s move to ramping in-store fulfillment of online orders and options like curbside pickup and next day delivery as well as refresh its website with “curated visual content and more precise search and browse functions as well as a more intuitive bag and checkout experience with broader ways to pay,” are among the tactics that help lure in millions of new customers.
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“Our experience in 2020 increases our conviction to take bolder actions to drive our business forward as a digitally-led omnichannel retailer,” Gennette added, describing the pre-pandemic business strategy, dubbed Polaris, that the retailer unveiled in February 2020. “We have shifted a large proportion of our current and future capital to digital supply chain and technology platforms to better integrate our digital and physical assets and deliver the most relevant shopping experiences. In part, enabled by these shifts, we expect that approximately $10 billion in sales will come from the digital channels by 2023.”
All told, in the fourth quarter, Macy’s digital sales accounted for nearly 44% of sales, up from 30% in 2019. And the department store — whose pre-pandemic and COVID-19-induced struggles are well documented — managed to pick up 7 million new customers during the period, with 4 million coming from digital.
“We all know that the pandemic has accelerated the use of digital channels, including our own, and that our customers’ preference for a digital shopping experience is a permanent shift,” said CFO Adrian Mitchell. “We’re excited about the opportunity to lean into digital growth. But make no mistake, our strategy revolves around growing omnichannel sales and profitability regardless of which channel our customers use.”
In that same vein, Mitchell, said the company — which announced in February 2020 its intent to shed around 125 underperforming stores — still views brick and mortar as an important part of its mix, albeit lesser so.
“We created our strategy knowing that having both stores and digital acting in concert is critical to maximizing our sales and relevance with our customers in any market,” said Mitchell. “For instance, we know that Macy’s digital sales per capita are two to three times higher in markets we have Macy’s stores. Conversely, from our store closures over the past five years, we have also observed that the growth rate of digital sales drops meaningfully when we close the store in a multi-store market and significantly when we exit a single store market.”
He added, “stores are providing the critical nodes to our digital customers.”
As a result, the retailer will continue to shift investments to omnichannel services such as buy online pick up in store, curbside pickup and same-day delivery — elements that consumers have come to expect as they demand more convenience in COVID-19 times.
The company plans to forge ahead with its six-pillar Polaris strategy, which — in addition to accelerating digital — includes modernizing its supply chain and technology infrastructure and improving its product assortment by leaning into on-trend fashion and style.
“We recognize that the next 12 to 18 months of our transformation journey will require great focus and superb execution,” Gennette said. “Our team has never been more aligned in their urgency to deliver the advances we discussed, which will strengthen our growth and profitability.”
For the three months ended Jan. 30, Macy’s recorded adjusted earnings per share of 80 cents, compared with the prior year period’s $2.12. Analysts had forecasted earnings of 12 cents per share. Revenues fell 18.7% to $6.78 billion, versus Wall Street’s expectations of $6.5 billion.
For the 2021 fiscal year, Macy’s anticipates net sales of in the range of $19.75 billion to $20.75 billion and adjusted earnings per share of 40 cents to 90 cents.