Macy’s Jumps After Raising Outlook, Beating on Sales Again

(Bloomberg) -- Macy’s Inc. posted a second straight quarter of sales gains and raised its full-year earnings outlook, a sign the department store is succeeding in luring back shoppers with its off-price offerings.

Total comparable sales, a key measure for the retail industry that’s used to gauge momentum, rose 4.2 percent in the fiscal first quarter, sharply outpacing analysts’ estimates. That sent the shares up the most in almost three months on Wednesday.

Macy’s is trying to woo shoppers back into stores with its discount-focused Backstage concept while it reduces unnecessary inventory. Chief Executive Officer Jeff Gennette is up against declining foot traffic in malls and increasing competition from online and traditional retailers.

“The winning formula for Macy’s Inc. is a healthy brick-and-mortar business, robust e-commerce and a great mobile experience,” Gennette said in a statement. “While we have more work to do, the continuing improvement in our stores is encouraging.”

Shares Spike

Macy’s expects the positive momentum to continue, raising its outlook for its full-year profit to between $3.75 and $3.95 a share, excluding some items. It had predicted profit of as much as $3.75 previously.

The stock climbed as much as 9.4 percent to $32.74 as of 9:39 a.m. in New York, the biggest intraday advance since Feb. 27. The shares had gained 19 percent this year through Tuesday’s close.

Sales in the quarter ended May 5 were $5.54 billion, topping the $5.43 billion analysts estimated. Total comparable sales -- including owned and licensed stores -- had been projected to rise 1 percent, according to Consensus Metrix.

Macy’s has opened about 20 Backstage locations in existing department stores, and plans to open 100 more this fiscal year. The retailer will also add a dedicated distribution center to support Backstage in the fall of 2019.

Overseas Buyers

In a sign Gennette isn’t shying away from experimentation, Macy’s bought the New York City concept-shop Story this month for an undisclosed amount. Story creates buzz by shifting the store’s layout and merchandise every couple of months. Its founder, Rachel Shechtman, will join Macy’s to focus on customers’ in-store experiences.

Gennette cited “significant improvements” in international tourism adding to robust consumer spending in the quarter. Tourism shopping, an important business especially for the retailer’s flagship Herald Square store, had suffered as the U.S. dollar strengthened against other currencies.

Still, the retailer is still fine-tuning its international sales strategy. The retailer announced a new plan for its business in China, ending its joint venture with Fung Retailing Ltd. Macy’s will continue to sell goods on Alibaba’s TMall platform as well as social media channels, the retailer said.

©2018 Bloomberg L.P.

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