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.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews