Axios Pro: Retail Deals

January 09, 2023

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Happy Monday, Retail readers. If you're at ICR, find Richard and say hello!

Situational awareness: The SEC has charged former McDonald's CEO Stephen Easterbrook with making false and misleading statements to investors regarding the circumstances of his termination in 2019.

1 big thing: Macy's holiday assessment

Picture of Macy CEO Jeff Gennette

Jeff Gennette at event in New York City. Photo: by Mireya Acierto/WireImage

At the ICR Conference in Orlando this morning, Macy's CEO Jeff Gennette offered a measured assessment of its holiday season performance, a bellwether of what's to come from competitors, Richard writes.

Why it matters: The new guidance — now between $8.16 billion and $8.4 billion for net sales is a decline versus Q4 2021 for the parent of both Macy’s and Bloomingdale’s, and is not encouraging given high single-digit inflation.

Details: This update lags against Q4 2021 net sales of about $8.67 billion when comparable sales increased 28.3%.

  • Macy's noted that Black Friday and Cyber Monday sales were in line with expectations and that sales the week before and after Christmas were above expectations.
  • Sales during early November and the first weeks of December took a bigger hit than expected.
  • Categories such as self-purchase and home goods suffered in particular.

Reality check: The department store operator did not take unplanned markdowns or chase unprofitable sales, Gennette said in his presentation.

  • Gross margin and earnings per share will both be within the forecasted range.
  • Also, comparable growth was going to be difficult versus 2021, which was a record year for many retailers both in terms of year-over-year growth and revenue.

What's next: Macy's digital marketplace, Macy's Media Network, and its off-mall concept Market by Macy's offer growth opportunities.

  • The company has already opened 10 Market by Macy's locations and plans to open many more in places such as Atlanta, and in some locales is replacing a big-box mall store, such as in Chesterfield, a suburb of St. Louis.
  • And Macy's Media Network is beginning to contribute to the company's overall profitability, Gennette says.
  • Lastly, Bloomie's, which is a smaller square footage version of Bloomingdale's, is opening in new markets.

By the numbers: Macy's is in a position to invest $3 billion over the next three years including $1.2 billion this year.

  • It's aiming for low single-digit revenue growth and double-digit EBITDA growth.

What we're watching: As one of the first reports on the holiday season from a large retailer, this has implications for how competitors might perform.

The bottom line: Even as Macy's closes its traditional mall stores, and says it has more pruning plans, it's seeing opportunities to expand digitally and physically with smaller square footage formats.

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