NEW YORK — Macy’s Inc. is more than ready to take on Amazon.com Inc. and J.C. Penney Co. Inc.
This story first appeared in the May 10, 2012 issue of WWD. Subscribe Today.
That was the message Wednesday from Terry J. Lundgren, Macy’s chairman, president and chief executive officer, who said his company is taking share from rival Penney’s and is well positioned with its clicks-and-bricks strategy to square off with the behemoth Amazon.
“We have demonstrated that we are taking market share,” Lundgren told WWD in an interview. “We are going to continue to take market share. We don’t have to have a perfect economic forecast in front of us to be able to forecast our business.”
He said the first quarter — when a 4.3 percent rise in sales and a better expense rate yielded a 38.2 percent profit gain — surpassed internal and external expectations and that there was “no reason to suspect that there’s any shortcomings in the business performance to follow.”
Investors wanted more, however, and scrutinized the company’s annual earnings outlook, which stood unchanged at $3.25 to $3.30 a share. Analysts were already looking for $3.41. The retailer’s shares fell 3.7 percent to $38.05 and analysts from J.P. Morgan and Morgan Stanley advised clients to take advantage of the slide and buy into the stock.
Lundgren said his consumer outlook was more positive than some of the recent economic data would suggest.
“The private sector is creating jobs,” he said. “That’s a good sign for the economy. We’ve added more jobs this year and feel very strongly about the fact that we can continue to do that. The overall unemployment situation should actually improve as time goes on and with that I believe GDP will improve.”
The recovery has been painfully slow in coming, though, and merchants continue to look to take business from rivals.
“The competition is coming from the higher-end retailers today and it’s coming from the online businesses for sure,” Lundgren said.
For now, at least, it seems Penney’s is not an immediate threat, although the company is just starting a dramatic repositioning under ceo Ron Johnson that has cut coupons out of the mix and will focus the store on a series of shops-in-shop.
Macy’s appears to be picking up business in malls where it goes head-to-head with Penney’s. “We’re performing better on average in those locations,” Lundgren said. “Some of that business is coming down the mall into Macy’s.”
Lundgren noted a clearer picture of how the Penney’s reinvention is developing will come out next week when Penney’s reports its first-quarter results.
As for Amazon — which is seeking to raise its fashion profile and cosponsored Monday’s Costume Institute gala at the Metropolitan Museum of Art — Lundgren said he’d prefer to have Macy’s omni-channel positioning than be a pure Web play.
“We have crystal clear evidence that the large majority, particularly of women, prefer to browse online and they come into the stores, often with their friends, and try on their product, try on the dresses,” the ceo said.
Macy’s is using a similar multipronged approach as it plans its business. The company now has more than 80 stores that are prepared to ship out goods to fulfill Web orders. That number will grow to more than 290 by the holiday season.
“This is a really big opportunity,” Lundgren said. “It actually over time should improve our inventory turn and therefore should improve our gross margin.”
In the first quarter, Macy’s net income rose to $181 million, or 43 cents a diluted share, from $131 million, or 30 cents a year earlier. The earnings came in 3 cents ahead of the 40 cents analysts estimated. Sales for the three months ended April 28 increased $6.14 billion from $5.89 billion. Combined sales through macys.com and bloomingdales.com rose 33.7 percent.
Selling, general and administrative expenses fell to 32.4 percent of sales from 33.5 percent a year earlier, helping to offset a gross margin decline.