The headwinds facing Macy’s pandemic-driven downturn recovery have been well-documented. Falling foot traffic at malls and a general department store category malaise are just two of them and the consequences were on display in its Q3 earnings announcement on Thursday (Nov. 19).
The key number showed a comp store drop of 20.2 percent compared to 2019 and a digital sales increase of just 27 percent. CEO Jeff Gennette told the company’s earnings call that Macy’s was cautiously confident that it could build on both results for the fourth-quarter holiday season.
“We recently completed a significant upgrade to our curbside offering, which includes an improved digital checkout experience, and a new app to quickly process curbside orders,” Gennette said. “Customers are responding well to the enhanced experience. Digital continues to thrive, and as a healthy component of our business. We’re pleased with the performance across all metrics, including traffic search and conversion. Most importantly, our growing digital business continues to contribute to profitability. And we’re making constant improvements to our mobile and cloud experience.”
Both Gennette and new CFO Adrian Mitchell pointed to Macy’s “Polaris” strategy as the focal point of the company’s future. That strategy is built on building customer lifetime value, accelerating personalization and monetization programs such as the Macy’s Star Rewards Loyalty program later this month. It also calls for investment in and optimization of its digital capacities.
Gennette said the strategy has already resulted in increased digital and loyalty program activity. New customers, he said, numbered north of 3 million, most of whom were younger and more diverse than Macy’s pre-pandemic profile.
“Our full focus is ensuring that these customers are seeded with the right content to get another purchase,” he said. “We’re trying to get them into our loyalty programs and a number of them have converted into the Star Rewards program. Most of them are coming into the bronze tier, which is gender neutral and gives us the opportunity to track them very carefully look at the cohorts that they might behave like, look at their signals, and then feed them personalized content based on that.”
Gennette was cautious about Q4, saying that he had seen a jump in gift-giving items as the industry attempts to pull the holiday season into an earlier calendar cycle.
“There are things that we learned about our business in 2020, that gives us confidence in the future,” he said on the call. “We’ve successfully managed the channel shifts to address customer demand for a true omnichannel experience. We have new customers coming into the brand via digital and loyal customers that continue to be attached to the brand. We’ve shown that we can flex categories and price points as the customer needs and demands change. We are early enough in our supply chain redesign that we were able to adjust our plans for a more omnichannel future.”
Overall for Q3, Macy’s reported a net loss of $91 million, or 29 cents per share, compared with net income of $2 million, or a penny per share, a year earlier. Net sales fell to $3.99 billion from $5.17 billion in 2019.