Macy's: Weak Q2 a "Speed Bump" in 3 Years of Momentum

8/21/2013
Citing the "health of the consumer" as a factor, Macy's Inc. reports second-quarter sales came in at $6.8 billion, a 0.8 percent drop to compared to the prior year. Despite the disappointing results, the retailer says women's apparel and Macys.com performed particularly well in the quarter.

CFO Karen Hoguet says Macy's leadership regards the second quarter as just a "speed bump." "We do not see this as a change in the momentum that we have accumulated over the past three years," Hoguet told analysts on a recent earnings call. "Our MOM strategies, My Macy's, omnichannel and Magic Selling, are alive and well.

"We have dealt with shifting consumer moods many times in our past, and I frankly think we can manage through this as well," Hoguet says.

However, the retailer is increasing its marketing budget for the second half of the year to redress the second quarter's 1.6 percent dip in transactions, which essentially is "a proxy for traffic," says Hoguet. "We're obviously also trying to be very sensitive to the fact that in this environment, price matters."

Women's apparel performed well in many areas. The Millennial-targeting Impulse department expanded with the addition of two new labels: Maison Jules, a private brand, and QMack, an exclusive brand by Jones Apparel Group, both of which have gotten off to a strong sales start. Career and modern wear-to-work apparel also sold well, and initial price points were strong across all women's apparel. Macy's has also seen success with Ideology, a private brand in the activewear category which is a fairly new area for the retailer.

Macy's "Door to Store" omnichannel inventory push has been a boon for e-commerce now that 500 stores are up and running with fulfillment capabilities. "Having increased ability to fulfill demand has been great for the website," Hoguet says. "It's also great for the stores that can offer inventory that perhaps they don't either carry in that store or that they've run out of.

"I think this is a terrific sort of weapon in our arsenal to help grow business this fall, and having 500 doors just increases the probability of satisfying the customer's demand," she continues.

With stores now helping to fulfill orders, Macy's has been adding a greater array of fashions to some of its smaller locations, with the logic that if the product doesn't sell as strongly as it would in a larger store, it's always available to satisfy orders from the web or from another store. These new product offerings help to make smaller stores more appealing, according to Hoguet, which helps to lift the brand in the eyes of the consumer.

Macy.com is in the "first inning" of its work with web analytics but already seeing some results. "Having the online analytics helps us to better understand our customer in a 360-degree view, which is very helpful in trying to fine-tune our marketing and how we're sending e-mails," explains Hoguet. "And we're trying to get better and better at personalization. So we do think it's helping, but we're really at the very early stages of utilizing that data."
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