Macy’s reports its first quarterly profit in a year

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Macy’s on Tuesday reported its first quarterly profit in a year, as its efforts to slash inventories during the holiday quarter and rely less on deep discounting paid off. CNBC’s Courtney Reagan reports. For access to live and exclusive video from CNBC subscribe to CNBC PRO:

Macy’s on Tuesday reported its first quarterly profit in a year, as its efforts to slash inventories during the holidays and rely less on deep discounting paid off.

The company said it expects 2021 to be a year for recovery and rebuilding, as it claws its way back from the losses it has suffered during the pandemic. It offered an outlook that anticipates continued pandemic-related obstacles during the spring, with momentum escalating in the back half of 2021.

Like many of retailers, Macy’s has been hurt as shoppers working from home and attending fewer social events make fewer trips to the mall during the health crisis and purchase less clothing.

Macy’s shares were up around 1% in premarket trading.

Here’s how the company did during the fourth quarter ended Jan. 30, compared with what analysts were anticipating, based on a poll by Refinitiv:

Earnings per share: 80 cents, adjusted vs. 12 cents expected

Revenue: $6.78 billion vs. $6.5 billion expected

Net income fell to $160 million, or 50 cents per share, from $340 million, or $1.09 per share, a year earlier. Excluding one-time charges, the company earned 80 cents per share, better than the 12 cents expected by analysts.

Sales fell to $6.78 billion from $8.34 billion a year earlier, better than the $6.5 billion that analysts were expecting.

Macy’s said same-store sales on an owned plus licensed basis fell 17.1% from 2019 levels. Analysts were calling for a 21.3% drop, according to Refinitiv data.

CEO Jeff Gennette said the company saw the most strength in home, beauty, jewelry and watches during the quarter, as consumers diverted more of their spending away from clothes and fancy shoes, and more toward accessories and items to dress up their homes.

E-commerce sales were up 21% in the period. The company said digital sales accounted for 44% of net sales, while roughly a quarter of Macy’s digital sales were fulfilled from its stores during the quarter.

The company said it saw nearly 7 million new customers in the fourth quarter, with many of them under the age of 40 and shopping online, not in stores.

Analysts attributed the better-than-expected results, in part, to a boost from Americans spending their stimulus checks.

But even if Macy’s is on the road to recovery, its results still severely lag others in retail, particularly those that are less reliant on selling apparel, GlobalData Retail Managing Director Neil Saunders said.

“Given Macy’s focus on clothing, if it can’t make this part of its business work properly then its long term trajectory does not look promising,” he said.

Macy’s said it expects annual online sales will eclipse $10 billion within three years, as the department store operator anticipates that shoppers’ preference for internet purchases will stick beyond the pandemic. It also is planning for its online business to become even more profitable.

Macy’s is in the midst of pruning its real estate, too, to keep better-preforming stores in America’s top malls open. In 2019, the company said it would shut 125 locations by 2023. Earlier this year, Macy’s released the locations of more than 40 stores to shut by mid-2021, as part of its three-year closure plan.

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