New York – Macy’s Inc. will beef up inventories later this year – but online, through the new marketplace platform launching in August. In-store merchandise levels will remain thinner than they had been prior to the pandemic.
Sales last year were healthy despite supply chain constraints and lighter in-stocks, the company reported.
“I think everybody has learned the value of leaner inventories. We do expect the stock-to-sales ratio to be very favorable to margin expansion,” said Jeff Gennette, corporate chairman and CEO. “If and when the promotional environment increases, we will be ready for that.”
Company AURs (average unit retail prices) increased just over 11% last year. This year’s increases are expected to be in the 5% range across all categories, he told analysts during this morning’s fourth quarter review.
Customer acceptance of higher prices has varied by category, brand and item. Better-tier, big ticket items such as sectionals passed along costs without resistance. Attempts to raise prices on opening price point mattresses and sofas were less successful.
“The bulk of our business for many of our brands is fashion,” said Gennette. “We’re focused on how we can put more make, more embellishment, more fashion into those goods. Those sometimes and often can carry higher tickets.”
Other key takeaways from the call:
Business cadence: Macy’s Inc. expects Q1 to show the greatest year-over-year sales increases. Gains through the remainder of the year will be more modest, in part because financials are up against consumer spending last year that was fueled by federal stimulus payouts.
Category expansion: The new Macy’s Marketplace will initially focus on categories tangential to existing businesses before expanding into completely new categories. The biggest change in physical stores will be the rollout of Toys R Us shop-in-shops to all Macy’s full-line department stores in the second half of this year. Among customers who shopped the TRU shops already in select stores last year, 25% were new to Macy’s and 93% cross-shopped other departments.
Physical footprint: The company plans to open more off-mall Macy’s and Bloomingdale’s units this year, which attract younger, more diverse consumers. The smaller format Macy’s stores will target markets where less-productive full-line stores are slated to close.
Overall, categories that went dormant during the pandemic are making a comeback, including women’s shoes, dresses and tailored menswear. Meanwhile, winning pandemic categories – including furniture and soft home – continue to show strength, said Gennette.
At Macy’s stores, fourth quarter comp was up 5.2% over 2019 and down 3.2% compared to last year’s Q4. Digital penetration rose to 38%. Bloomingdale’s comp rose 13.0% compared to 2019 and 1.8% year-over-year. Digital penetration hit 42%.
Fourth quarter consolidated net sales for the company rang in at $8.665 billion, up 3.9% compared to Q4 2019 and up 27.8% over last year’s period. Net income more than quadrupled year-over-year to $742 million, or $2.45 per diluted share.
For the full fiscal year, consolidated net sales climbed 41.0% year-over-year to $24.5 billion. Macy’s Inc. generated net income of $1.43 billion, or $4.55 per diluted share, vs. a net loss of $3.94 billion, or $12.68 per diluted share.