Macy’s didn’t have an easy year, but the retailer is moving to turn things around, including testing rental and resale as part of its retail strategy.
Earlier this month, Macy’s announced it is closing 125 stores in “lower tier" malls and consolidating its offices to New York City and Atlanta as part of a three-year plan to stabilize profitability and position the company for growth. The streamlining will slash around 9% of its corporate and support function jobs, about 2,000 positions, and make Atlanta, GA, its primary tech hub.
“Taken as a whole, 2019 did not play out as we intended for Macy's, Inc.,” Jeff Gennette, chairman and CEO of Macy’s, said in a statement. “However, we executed well during the Holiday 2019 season. We were pleased with the significant trend improvement in the fourth quarter, including a meaningful sales uptick in the 10 shopping days before Christmas.”
Macy’s Inc. reported fourth quarter 2019 earnings and sales that beat analysts’ expectations. Net income totaled $340 million, or $1.09 a share, in the quarter, down from $740 million, or $2.37 a share, in the year-ago period. Adjusted per-share earnings came to $2.12, easily topping Street estimates of $1.96. Sales fell to $8.34 billion from $8.455 billion, also ahead of the $8.32 billion analysts had expected.
“Together with disciplined expense management, our solid sales results in the fourth quarter allowed us to deliver stronger-than-expected earnings results. Importantly, we exited the year with a clean inventory position,” said Gennette.
Comparable inventory in 2019 was down 1.4% to last year, underscoring Macy’s commitment to a more productive use of inventory, CFO Paula Price said on the retailer’s earnings call.
Macy's also provided an update on its resale and rental tests during the call, noting both are helping to attract new and younger shoppers. The department store retailer has been selling used clothing at 40 locations in partnership with ThredUp since August. It also partnered with CaaStle on a subscription rental program at its Bloomingdales chain called “My List at Bloomingdale’s.”
Macy’s has been testing the location of the ThreadUp resale clothes in stores and found locating the merchandise adjacent to the juniors department has had the best outcome, the retailer revealed on the call.
“It's definitely resonating with this millennial Gen Z customer,” Price noted. “We have been able to attract many new customers that are coming into our brand.”
The ThredUP pilot sells apparel brands not currently found at Macy's, in an effort to expand the selection the department store offers customers. Macy’s is still in the learning stage, working to build a list of brands that are “aspirational, recognizable for the under 40 customer” and perfecting placement, but has extended the pilot program to Spring 2020.
Macy’s is also finding of the My List subscription program that 50% of the subscribers are millennial and 30% are brand new to Bloomingdale's. The retailer is conducting surveys with these new customers and finding they like the service because they “trust” Bloomingdale's are “enjoying the quality of the service.”
Macy’s currently has 80 vendors working with My List and is launching another 20 vendors in the first quarter of 2020.