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Macy's minor Miracle on 34th Street - net income and revenue down, but Wall St gives it a break

Stuart Lauchlan Profile picture for user slauchlan November 20, 2023
Summary:
As CEO Jeff Gennette gets ready to depart, Macy's manages to please - or at least appease - investors.

macy's

It’s that time of the year again when Miracle on 34th Street starts popping up on TV screens.

Macy’s just had its very own little miracle - turning in quarterly numbers that saw both revenue and net income tumble year-on-year, but not getting the pounding from Wall Street that so many other retail brands have been given. 

Net income fell 60% year-on-year to $43 million, while revenue was down 7.8% to $5 billion.

For outgoing CEO Jeff Gennette, it’s a time for mixed reflections: 

While I did not achieve everything I had set out to accomplish, I am proud of my contributions. We exited the pandemic a healthier and more agile company, leaning into data-driven tools and processes to guide a renewed focus on expense and inventory disciplines.

Before he departs in a couple of months, there’s the Holidays season to get through. Walmart and Target have been downbeat about how they see spending going this year. For his part, Gennette offers:

When you think about Black Friday, the competitive landscape has really shifted to Black Friday deals prior to Black Friday. We're in the midst of that along with our competitors. Customers are taking advantage of that. But there is a pilgrimage that goes to brick-and-mortar in our sites for Black Friday and that full weekend. We're well ready for that. And in Cyber Week, obviously starting with Cyber Sunday, Cyber Monday, [are both] really important.

Then, we go into a 10-day or so lull, which is very typical. We're ready for that in terms of where customers are re-setting. We're re-setting for the last 10 days. That's a really important timeframe for us. And one thing that sets up well for all retailers is that full weekend before Christmas, with Christmas dropping to a Monday. So, all that is anticipated.

Spring forward

Meanwhile his successor in the hot seat, Tony Spring, has his own plans for the omni-channel future: 

Looking beyond Holiday, I am confident we can evolve Macy's, Inc. into a more relevant destination of choice for our customers and partners. The fundamentals are there. We have a balanced portfolio of nameplates, each with its own identity. This is a distinct advantage. We can learn from each other without becoming one another as we remove silos to optimize our collective customer insights.

We are also balancing art and science. I like to say that this is STEAM, not STEM. We are embracing data science tools, including AI and machine learning, to drive more accurate and agile decision-making based on changes in demand. This, married with the art of human judgment, helps us become more proactive and customer influenced.

We're emphasizing variety versus redundancy. The customer today does not want an endless aisle. They want the best aisle, which provides an improved assortment, leveraging the use of data-driven tools working closely with our vendor partners. 

Macy’s digital marketplace will continue to play an important role, he added, as will its Bloomingdale’s counterpart: 

[Macy’s marketplace] had over 1,500 brands on the platform at the end of the third quarter and grew gross merchandise value by approximately 22% on a consecutive quarterly basis. Bloomingdale's introduced its marketplace in July and had 55 curated brands available at the end of the quarter. Across both marketplaces, we're experiencing healthy cross-shopping, resulting in higher average order value and increased units per order.

My take

Gennette hasn’t had the easiest of times as CEO at one of the US’s most iconic retail brands. Quite apart from having to turnaround some of the self-inflicted harm Macy’s had done to itself, he was at the helm during a global pandemic that wiped out the all-important travel/tourist business for the brand. The transition to Spring is unlikely to see any major shifts in strategic direction - he’s been involved with the broader Macy’s business for 36 years and known Gennette for 20. It’s fair to say they’re on the same page. 

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