This report was updated at 3.00 pm November 19, 2021
Macy’s third quarter 2021 report was very strong–net sales and earnings exceeded expectations. The big news, however, was Macy’s response to active investors who demanded a split of digital business and brick and mortar stores. I said in a previous blog that this was nonsense. Management responded by planning a curated digital marketplace with an expanded assortment of existing categories and brands and the introduction of a range of new categories and brands.
The new categories and brands will come from third-party merchants who sell their products on macys.com and bloomingdales.com. The announcement makes sense since it will unlock opportunities for sustainable and profitable growth. The new site, to be opened in the Fall of 2022, is partnered with Miraki, the industry-leading enterprise marketplace technology company. Miraki brings “dynamic platform capabilities that will seamlessly integrate into Macy’s and Bloomingdale’s digital architecture and allow for evolving strategies over time.” Furthermore, Miraki’ s best-in-class seller tools will enable sellers to monitor. drive and grow their businesses within Macy’s curated parameters.
Adrien Nussenbaum, co-founder and co-CEO of Miraki said, “To be a leader in today’s economy means balancing imperatives, staying true to the trusted brand DNA that gives customers value, while also anticipating and rising to meet their evolving expectations. It is a pleasure to partner with Macy’s, a retailer that both understands the potential of marketplaces to positively transform a business and has the vision, ambitions and strategy to fully reap the benefits.”
Max Baer, chief digital and customer officer at Macy’s Inc., stated that “this announcement is an exciting next chapter in our digital evolution. The marketplace platform will further accelerate our Polaris strategy and unlock new opportunities for sustainable and profitable growth. Our digital business is targeted to generate $10 Billion in sales by 2023, and we expect the new market place platform to produce incremental revenues.”
In the third quarter of 2021 Macy’s diluted earnings per share was $0.76 and the adjusted earnings per share were $1.23. That compares with last year’s loss of ($0.29). One must remember that retailers were just coming out of the height of the pandemic caused by Covid-19. During the 2021 quarter that just ended the company was able to repay $1.6 Billion of debt ahead of its due date and the company was also able to repurchase $300 million of shares.
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Comparable corporate store sales were up 37.2% on an owned basis and 35.6% on an owned-and-licensed basis compared to 2020 Sales were up 8.9% on an owned basis and 8.7% an owned a licensed basis. Total 2021 third quarter sales increased 36.3% to $5.440 Million. The company indicated that Macy’s comparable sales were up 36.4% on an owed base whereas Bloomingdale’s sales were up 43.4% on an owned base.
The company raised its guidance expecting stronger sales and earnings. Sales for the fiscal year are expected to be in the $24.1 to $24.3 range instead of $$23.6 to $24.0 as previously announced. Fully diluted earnings per share are expected to be now $4.57 to 4.76 instead of $3.41 – $3.75.
POSTSCRIPT: I applaud management’s action to develop a new curated marketplace platform. It will bring more customers to the digital site. It also shows that management is innovative and inventive in its response to activist investors.
Sales for the fourth quarter are expected to be strong. Macy’s has plenty of inventory (at the end of the quarter inventory was $6,141 Million 19.3% higher than in 2020.) While there may be some items in short supply, I am sure that Macy’s and Bloomingdale’s buyers will try to find substitutes. Of course, foreign visitors are still missing and Macy’s must rely on the four million new shoppers it gained to have a merry holiday.
Additional news: Macy’s has hired AlixPartners to review a potential separation of the internet business and brick and mortar business. This was pushed by Jana Partners, an activist group. AlixPartners is to examine the ramification of the move.