Department store chains Macy’s and Kohl’s posted strong results for the fiscal third quarter as shoppers went back to buy clothing and other items that fell to the bottom of the shopping list when the pandemic struck
NEW YORK – Department store chains Macy’s and Kohl’s posted strong results for the fiscal third quarter as shoppers went back to buy clothing and other items that fell to the bottom of the shopping list when the pandemic struck.
Macy’s and Kohl’s benefited from increased sales during the quarter. Both companies raised their annual financial outlook.
Macy’s and Kohl’s are posting strong sales along with many other retailers as they grapple with rising costs and depleting supply chains during the holiday shopping season. They are diverting shipping to less congested ports to get goods on the shelves. Still, Kohls said the delay has disproportionately affected women’s businesses, and the department store is working to address the issue. Kohl’s said that some late arrivals may have to be packed and used for another season. Both retailers said they do not think the supply chain issues will be resolved until the end of next year.
Retailers like Macy’s are also paying higher wages and increasing benefits for their employees amid a tight labor market. Earlier this month, the department store said it would pay a minimum of $15 an hour for new and existing employees until May.
Macy’s CEO Jeff Gennett also told investors on its earnings call that it hired consulting firm AlixPartners to evaluate whether the retailer should separate its e-commerce division from its stores, as did Sachs. Fifth Avenue did it earlier this year. The move comes as it has been under pressure from activist shareholder Jana Partners to divest the division to create better valuations.
Macy’s earned $239 million, or 76 cents per share, for the three-month period ended October 30, according to a FactSet poll.
The company had a loss of $91 million in the same period last year.
Sales for the quarter reached $5.44 billion, which also topped analysts’ expectations.
Sales at stores, including licensed businesses such as cosmetics, grew 35.6% in at least one year.
Online sales grew 19% compared to the year-ago period, and 49% compared to the same quarter in 2019.
The company booked strong sales of home goods, fragrances, jewellery, watches and sleepwear. Categories like clothing, men’s tailored clothing and accessories continue to improve.
The New York-based company added 4.4 million new customers to the Macy’s brand, a 28% increase over 2019.
Macy’s was able to increase inventory by 19.4% compared to last year’s third quarter, with shortages and slowing supplies as the US economy emerges from recession caused by the pandemic.
Macy’s said it will launch a third-party marketplace that will expand its assortment of product categories and brands.
Macy’s is narrowing and raising its full-year 2021 guidance. It now expects sales of $24.12 billion to $24.28 billion, up from $23.55 billion to $23.9 billion. Adjusted earnings per share are now projected in the range of $4.57 to $4.76, up from $3.41 to $3.75.
Analysts expect $3.92 per share on sales of $23.78 billion, according to FactSet.
Sales grew 15.5% to $4.36 billion, and in-store sales grew 14.7% in at least one year.
The company raised its full-year earnings-per-share guidance to between $7.10 and $7.30, up from its previous forecast of $5.80 per share to $6.10 per share. Analysts were expecting $6.14 per share, according to FactSet.
The launch of Sephora’s stores in Kohl’s has been receiving good response so far, with 25% of customers new to the retailer. They are also smaller and more diverse.
During the earnings call with analysts, Kohl’s CEO Michelle Gass said overall inventory is down 25% compared to 2019; The list of women goes even further down. The company had targeted levels below 2019, but they are still below plan. On the other hand, inventory in activewear, which is enjoying strong sales, is in “great shape”, she said.
Gas told the Associated Press that the inventory delay was a “missed opportunity.” She said customers are loving the overall rejuvenation of the women’s business, including brands like Lauren Conrad, but “we just need more.”
Macy’s shares were up about 21% in Thursday afternoon trading, while Kohl’s shares were up about 8%.
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This story has been corrected to show that Kohl’s overall list is down 25% and the women’s list is even higher, with the women-only list down 25%.