Macy’s Hopes Plenti Generates Plenty Of Sales

While Macy’s first quarter revenue projections and sales fell short of expectations, the retailer’s executive team remained bullish on being able to bounce back.

Macy’s CEO Terry Lundgren and CFO Karen Hoguet shared insight yesterday (May 13) into what impacted the revenue and sales dip for the quarter. Sales in Q1 fell to $6.23 billion, down .7 percent from $6.28 billion a year ago. Net income also dipped to $193 million, down from 2014’s Q1 net income of $224 million.

“We had expected our first quarter sales to grow at a rate lower than our guidance for the full year. We fell short because of a confluence of factors,” Lundgren said in the company’s earnings statement. “Delayed merchandise shipments from the West Coast port slowdown and severe winter weather early in the quarter restrained business levels. Moreover, sales were negatively affected by lower levels of spending by international tourists visiting major U.S. cities with flagship Macy’s and Bloomingdale’s stores, including New York City, Chicago, Las Vegas and San Francisco.”

While omnichannel has been cited as a potential point of growth for Macy’s, the transition into planning for the new cross-channel offerings may have set Macy’s back a bit in the first quarter — though Lundgren suggested those issues were temporary.

“The omnichannel reorganization in our merchandising, planning and marketing organizations announced in January and February also caused some temporary disruption as executives in those areas learned new roles and procedures. Fortunately, most of these short-term issues are largely behind us,” he said.

To help spur growth to overcome some of those issues, Lundgren mentioned how Macy’s plans to invest more in its top stores, including higher end goods. At a time Macy’s plans to push some of its stores toward the upscale side, the retailer also recently announced that it plans to test four pilot stores as part of Macy’s off-price initiative, known as Macy’s Backstage.

“Within our existing business, this includes an intensification of focus in our Top 150 stores, major growth trends in active categories and accelerating success in dresses, the vanguard merchandise category in our omnichannel reorganization,” Lundgren said.

He said those stores were based on “recent sales growth, external economic factors in their markets, customer service scores in these stores, as well as their profitability.” Macy’s will also be focused on its “30 platinum doors,” which are Macy’s top performing stores.

“We believe there is opportunity to elevate these stores further and accelerate their growth and hopefully we will begin to see the benefit this fall particularly in the fourth quarter,” Lundgren said.

Macy’s did have some positives to focus on in its earnings report, like the launch of its new Plenti loyalty program, which so far has exceeded expectations, Lundgren said. This point was echoed by Hoguet in the company’s earnings call with analysts. Still, it could take time for Plenti to resonate with customers.

“In terms of Plenti, people here are betting on when we’re going to see the impact. I think most of the knowledgeable people think it’s likely to be spring 2016, because it will take customers time to start building points and really understanding the strength of the program,” Hoguet said. “Frankly, that would be consistent with what we saw with Bloomingdale’s when we rolled out the Loyallist program. It does take customers a while to understand these new programs, but hopefully it will help the back half. But we’re not counting on that.”

The program was launched May 4 as part of a U.S. loyalty coalition involving major U.S. brands. Plenti, which is American Express‘ new loyalty program, allows U.S. consumers to earn and spend points at a variety of merchants, no matter how they choose to pay. After signing up at a participating merchant — like Macy’s — or through the Plenti app, a customer will earn “Plenti points” each time he or she spends money in any form – cash, credit or debit card. The number of points a customer earns on a transaction will vary from merchant to merchant.

“Plenti offers opportunities to both incent our current customers to buy more and also to bring new customers into Macy’s who enter the Plenti program through the other participating brands,” Hoguet said. “In the first week, we have already enrolled more than 2 million customers at Macy’s, which is well ahead of expectations. We are very pleased with early customer response and interest as well as our store team’s terrific execution.”