Macy’s Inc. (M, Financial), a major omnichannel retailer, said strong company performance in January contributed to earnings growth that exceeded management’s expectations for fiscal 2017.
Fourth-quarter adjusted earnings of $2.82 per share increased 80 cents from the prior-year quarter. For fiscal 2017, Macy’s reported a 66-cent increase in earnings per share.
Brief summary of earnings
CEO Jeff Gennette said the company delivered a strong quarter, highlighted by continued momentum in both the company’s brick-and-mortar and digital businesses. Comparable sales on an owned plus licensed basis increased 1.4%, exceeding management expectations due to the “strong sales model” Gennette discussed in the earnings call. The latter had double-digit growth for the 34th consecutive quarter, a span of 8.5 years.
Gennette also mentioned Macy’s “North Star” strategy contributed to strong performance during the quarter and that the company expects to build on this momentum by “executing a stronger retailing platform” and meet the demand of consumers. The CEO noted strong customer response to the Star Rewards program: for example, the “most valued” customers feel that they are “rewarded” with perks like free shipping at macys.com and high Macy’s rewards cash.
Chief Financial Officer Karen Hoguet mentioned full-year comparable sales on an owned plus license basis declined 1.9%, about 0.3% less than the previous guidance mentioned January 2017. Hoguet also mentioned several real estate initiatives, including the sale of the upper seven floors of the State Street store in Chicago to a private real estate fund sponsored by Brookfield Asset Management Inc. (BAM, Financial) and the redevelopment of nine assets as part of a 50-asset portfolio. Such initiatives are designed to “add vibrancy and desirability” to the stores, enhancing the retail experience in Macy’s key markets.
Company stock rises on strong earnings performance
Macy’s traded approximately 4.5% higher as the company reported solid earnings performance for the latest quarter.
GuruFocus ranks Macy’s profitability 7 out of 10 as the company’s operating margin and return on equity outperform 60% and 80% of global competitors.
Disclosure: No positions.
