By  on May 17, 2018

Consumers haven't lost their appetite for shopping the old-fashioned way.Macy's strong first quarter, marked by solid sales and profit gains and even a lift in the usually sluggish women's business, is the first of what's expected to be several upbeat reports from major retailers over the next two weeks.First-quarter results from Walmart Stores Inc., J.C. Penney Co. Inc. and Nordstrom Inc. are due out today; Kohl's Corp. reports on Tuesday; Target Corp. the day after, and Gap Inc. reports on May 24.Low unemployment, tax savings and high consumer confidence are helping fuel the gains — along with better merchandising and inventory control, plus multiple options on how to shop and receive items through different channels. There's an improved outlook lately on consumers not abandoning brick-and-mortar for online shopping, despite the thousands of closings announced over the past two years, and robust gains on web sites."Women's apparel met our expectations. We got growth. It was positive, but not as positive as men's and kids," Jeff Gennette, Macy's Inc. chairman and chief executive officer, told WWD on Wednesday, just after the retailer reported that comparable sales rose 4.2 percent — the best quarterly sales growth in over three years.Macy's net profit jumped to $131 million in the first quarter ended May 5 versus $77 million in the year-ago period. Total sales rose to $5.54 billion last quarter versus $5.35 billion in the 2017 quarter.By the end of trading, Macy's stock was up almost 11 percent to more than $33.17, and many other retailers saw share price gains as well."We had great strength across the board in men's," Gennette said in an interview. "There is not a piece in men's that isn't good — traditional and contemporary — men's tailored clothing, shoes, dress furnishings, underwear. Activewear is a huge standout."Kids was also strong, Gennette said, citing dress-up styles and basics in infants."Our dress business is so strong. Active in women's ready-to-wear is very strong," Gennette added, singling out Tommy Hilfiger, Lauren and the Alfani private brand, in men's and women's.Men’s and women’s fragrance — especially gift sets — and fine jewelry also performed well. On the down side was fashion commodities, including tank tops, shorts and T-shirts.Analysts see Macy's as a barometer for the industry."We come away impressed with Macy's strong first-quarter 2018 results from an operating perspective,” Dana Telsey of the Telsey Advisory Group said in a report Wednesday. "The company appeared to execute well relative to its brick-and-mortar and digital businesses, that latter of which achieved another quarter of double-digit growth. While Macy's has been working to make improvements in its own business, we believe this performance sets an optimistic tone for the sector."After strong fourth- and first-quarter results, Macy's raised its earnings guidance for 2018 and is expecting earnings per share to be within $3.75 to $3.95, 20 cents higher than a prior forecast. Total sales in 2018 are seen ranging from a 1 percent decline to a half-percent gain. Same-store sales are seen rising 1 to 2 percent.As far as the fashion outlook for spring and fall, "I do think there is enough newness," Gennette said, though he suggested it's not across the board.Macy's is expanding its vendor direct program to provide a more comprehensive offering online. For big-ticket and home categories, Macy's has been focused on "modern farmhouse, midcentury and glam" style inspiration. In men’s and women’s fashion, the vendor direct launch is around midyear, and the strategy is to go after contemporary brands, athletics and specific items for men as well. While primarily a play to pump up the home store with additional categories not sold, the vendor-direct program enables Macy's to provide online entire offerings from brands and designers already sold at Macy's."You'd think as the biggest seller of Ralph [Lauren] in America we would have the full line. We don't," Gennette noted. He expects vendor direct to also enable Macy's to sell the full lines from other designers such as Michael Kors and Calvin Klein. With the vendor-direct strategy, "Margin is less, expense is lower, profitability is at expectation," Gennette said.Gennette said Macy's has six times the assortment online compared to in stores. "A hyper-curated mix of content is the right thing in the brick space for a consumer today," Gennette said.Macy's is continuing to roll out Backstage off-price areas inside its stores, with 100 more expected this year, and is just starting to take the concept to premium locations. Also, 25 freestanding Blue Mercury stores are being opened this year.Macy’s also has a new approach to its business in China. It's ending the joint venture with Fung Retailing Ltd. Macy’s will remain active on Alibaba’s e-commerce platform Tmall, as well as social media channels. The Macy’s e-commerce team in San Francisco will manage the ongoing China business with operational support from Fung Omni in Shanghai.During the interview, Gennette cited a number of internal and external factors contributing to the improved selling. "You've got sky-high consumer confidence, record low unemployment, tax savings, and more [consumer] open-to-buy, all coalescing. Also, there are so many ways to transact. It's easier than ever," to shop, online or in-store, he said.He also attributed the improved performance to several factors, among them:• A rise in international tourism spending, which rose 10 percent in the quarter. Gennette sees a healthy trend in international tourist spending continuing into at least the balance of 2018.• Macy's "massively simplified" merchandise restructure since August 2017, from three pyramids down to one, meaning the team is "operating faster than ever and is more laser-focused on the consumer."• Expressing the Macy's brand better in the social media space.• "Much cleaner" inventories.• Impact from the new loyalty program launched last year.• Greater regular-priced selling with the average unit retail price up 5 percent in the first quarter.“We exceeded our expectations and saw strong performance across all three brands — Macy’s, Bloomingdale’s and Bluemercury — as well across all geographic regions and families of business,” said Gennette. But he ended on a cautious note. "It’s a competitive environment — the most competitive environment I've ever seen."

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