NEW YORK — Macy’s Inc. kicked off third-quarter earnings season with a pleasant surprise, and some signs of strengthening in the women’s apparel business.
The department store, which had projected a decrease in earnings, ended up topping year-ago results with better-than-expected sales and gross margins and lower expenses.
Net income rose 4.3 percent to $145 million, or 36 cents a diluted share, from $139 million, or 32 cents, a year earlier. Wall Street expected the company’s earnings per share to fall to 29 cents. But shares of Macy’s were caught up in a general market retreat after the presidential election and fell 2.3 percent to $40.45.
Women’s apparel has been a soft spot across retail lately, but chief financial officer Karen Hoguet said the trend had improved in Macy’s assortment of classic styles.
“It has to do with product design…putting newness in,” Hoguet told analysts on a conference call. “Often people think of traditional or classic as not being new. As we looked at our own private brands, starting with Charter Club, all of the feminine apparel, we really made an effort to retool the line and offer that classic traditional customer more newness and it’s really paying off.”
Even so, there is still work to be done. Juniors was among Macy’s weakest categories and women’s apparel was the toughest area in the upscale Bloomingdale’s division.
The general malaise in the women’s category is just one of the challenges Macy’s faces. Like many, the company is still gauging the impact of Hurricane Sandy, for example.
“As we think about the storm’s impact, it’s greater than just the lost sales from the closing of stores,” Hoguet said. “Customers in the most directly impacted areas of Long Island and New Jersey have other priorities right now. Transportation issues are making it challenging for customers who do want to shop to get to the stores. And to some degree, the receipt of merchandise was interrupted. We are spending unplanned dollars to make sure that our stores recover and our staff.”
Analysts on the conference call were looking for information about the company’s Web sales, which shot up 40.4 percent in the quarter and helped push total comparable-store sales up 3.7 percent.
Macy’s, like many other retailers, is still trying to figure out the Web dynamic and focusing much of its energy on stitching together the store and online experiences with an “omnichannel” approach.
“It is getting harder and harder to define Internet versus store sales given all the ways customers are now researching products, as well as shopping and purchasing,” Hoguet said.
Online is not just a growing business in sales terms, but one with more access points.
“We’re seeing a lot of growth in the tablets,” Hoguet said. “More so than smartphones.…You have got to really think about the offering on a smartphone, the tablet, as well as the desktop or laptop device.”
Macy’s Web business is not only expanding faster than the brick-and-mortar sides, it has higher sales per average transaction and better margins, the cfo said.
The company’s total third-quarter gross margins rose to 39.6 percent of sales from 39.4 percent a year earlier.
Sales for the three months ended Oct. 27 increased 3.8 percent to $6.08 billion from $5.85 billion a year earlier.
Macy’s boosted its annual earnings outlook to $3.35 to $3.40 a diluted share, up from the $3.30 to $3.35 previously projected. That brings the high-end of the firm’s estimate in line with the $3.40 Wall Street was already expecting.
The company also said that it would join other major players such as Wal-Mart Stores Inc. and Saks Inc. in abandoning the practice of reporting monthly comparable-store sales, as of the end of this fiscal year. Retailers have gotten away from the monthly ritual because they say it encourages shareholders to focus overly on short-term performance.
Macy’s ditched monthly comps once before, but restated the practice in late 2008 as the financial crisis worsened.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast