Macy’s Surprises Wall Street With a Profitable Quarter Amid Mall Store Closures

Results appear to be an early vindication of the retailer's Polaris initiative

Longstanding challenges remain for Macy's.
Alexi Rosenfeld/Getty Images

A year after announcing it would close 125 stores and on the heels of three quarters of losses, Macy’s announced a profitable Q4 on Tuesday. Net income for the 13 weeks ended Jan. 30 reached $160 million on net sales of nearly $6.8 billion.

While comp-store sales were down by 17%, digital sales grew by 21% and made up 44% of sales overall. Meanwhile, the legacy retailer announced adjusted an earnings per share of 80 cents, significantly beating the estimates of analysts, who’d forecast EPS of only 12 cents.

The results come as an early and apparent vindication of the Polaris strategy the retailer announced in February of last year. Apart from store closings and layoffs, the multi-pronged effort included plans to focus on quality fashion brands, de-emphasize discounting and devote more resources to ecommerce channels.

“The changes we are making are deep and impact every area of the business, but they are necessary,” CEO Jeff Gennette said at the time. Going forward, Macy’s said its digital platforms “will become an even more profitable contributor to our business,” with sales expected to hit $10 billion in the next three years.

Over the holidays, shoppers bought less footwear and clothing but whipped out their wallets for housewares and luxury items like watches and jewelry. Roughly a quarter of digital customers took advantage of curbside pickup at physical stores, but delivery clearly carried the day. Overall, some 7 million new customers came to Macy’s online, according to the company.

Challenges still loom for Macy’s

The promising results do not mean that Macy’s—like any number of other legacy retailers—is out of the woods, of course. Analysts have pointed out that second-round stimulus checks (which went out at the end of December) might well have driven some of the end-of-year shopping.

Macy’s has also been historically reliant on apparel sales, and those were reportedly down 33% for the quarter. Even so, apparel sales were off by 19% for the year across the entire category, according to NPD data, and once Americans return to their offices, retailers of all stripes are hoping for a rebound.

Another longstanding issue for Macy’s issue is location. Notwithstanding its world-famous flagship store in New York’s Herald Square, Macy’s has anchored shopping malls around the country for decades. When corporate announced its three-year plan to shutter 125 stores last February, it aimed the axe at lower-tier malls. As part of that plan, employees in 45 stores received notice last month that their locations would be closing. Looking ahead, Macy’s says it still has faith in “A” mall locations, though it’s been exploring options.

Macy’s, which also operates about 50 Bloomingdale’s locations, is reportedly dusting off a new prototype called Bloomie’s, a 22,000-square-foot store whose amenities will include pickup for items ordered online. Located in Fairfax, Virginia, that store is slated to open in the fall of this year.

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