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Macy's (M) Omni-Channel Efforts Bode Well, Up 60% in a Year

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Shares of Macy's, Inc. (M - Free Report) have been climbing up the charts, thanks to the effective implementation of its Polaris Strategy and robust omni-channel endeavors. The Polaris strategy mainly aims at strengthening customer relationships, expanding assortments, accelerating digital growth, optimizing store portfolio and reducing costs.

This currently Zacks Rank #3 (Hold) player’s shares have surged 60.4% in the past year, outpacing the industry’s 39.5% rally. A VGM Score of A coupled with an expected long-term earnings growth rate of 12% further highlights its potential.

Let’s Delve Deeper

Macy's continues to deepen its focus on growing as a digitally-led omnichannel retailer and executing its Polaris Strategy. Management undertook various initiatives to deliver customers a seamless shopping experience. Its collaboration with Swedish buy now, pay later group Klarna is enabling the company to offer shoppers a financial ease and payment flexibility with their online purchases. Here, shoppers can choose to pay in four equal and interest-free installments at the online checkout.

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Additionally, Macy’s tie-up with DoorDash for expediting delivery service appears encouraging. M continued to enhance its digital offerings, including a redesigned mobile app, live shopping functionality and the addition of payment options, such as Apple Pay, Klarna Express Checkout, PayPal and Venmo. M also announced the launch of a digital marketplace to strengthen its omni-channel retailing capabilities. To power the platform, M partnered with Mirakl, a leading enterprise marketplace technology company. The platform is expected to be launched in the second half of 2022. Selected third-party merchants will sell products on macys.com and bloomingdales.com. M’s expanded omni-channel offerings, such as curbside, store pickup and same-day delivery bode well.

During the fourth quarter of fiscal 2021, digital sales increased 12% from the prior fiscal-year quarterly level and 36% from fourth-quarter fiscal 2019 levels. Digital penetration was 39% of net sales in the quarter under review. Approximately 63% of digital demand sales came from mobile devices. Stores fulfilled 28% of the digital sales in the quarter. Digital conversion rate for the quarter was 4.5%, up 9% from the fourth-quarter fiscal 2019 reading.

Macy’s app downloads surged 81%, sequentially. M’s digital business is on track to generate $10 billion of sales by fiscal 2023, while the new digital marketplace platform is expected to produce incremental revenues on top of that target.

Management looks forward to extending its Backstage locations across the country this spring. Macy’s will introduce 37 Macy’s store-within-store Backstage locations starting Apr 9 through Jun 2022. These stores, ranging from 11,000 to 16,000 square feet, will offer guests on-trend assortments and quality merchandise to fit their personal style. Guests can shop off-price and luxury items under one roof. Such stores are efficiently catering to the needs of changing consumer behaviors and boosting higher sales. During the fiscal fourth quarter, Backstage locations exceeded M’s stores by more than three times.

What’s More?

Buoyed by such strengths, Macy’s continued its sturdy performance in fourth-quarter fiscal 2021, despite supply-chain bottlenecks, labor shortages and elevated inflation. Both the top and the bottom line not only beat the Zacks Consensus Estimate but also increased year over year. The department store bellwether witnessed sturdy growth across all three brands, namely Macy’s, Bloomingdale’s and Bluemercury. Also, M’s board raised its quarterly dividend as well as authorized a new $2-billion share repurchase program. It hiked its quarterly dividend 5% to 15.75 cents a share.

Encouragingly, management anticipates net sales between $5,270 million and $5,370 million for first-quarter fiscal 2022. This indicates an improvement from net sales of $4,706 million reported in the year-ago period. It projected adjusted earnings for the fiscal first quarter in the band of 77-85 cents a share, suggesting an increase from 39 cents reported in first-quarter fiscal 2021. Macy’s expects fiscal 2022 net sales in the bracket of $24,460-$24,700 million, suggesting flat to up 1% growth from fiscal 2021 levels.

Wrapping up, Macy’s is likely to continue performing well on the back of the aforesaid sturdy endeavors.

Key Picks in Retail

Some better-ranked stocks are Capri Holdings (CPRI - Free Report) , Boot Barn Holdings (BOOT - Free Report) and Tapestry (TPR - Free Report) .

Capri Holdings, which offers accessories and footwear, has a Zacks Rank #2 (Buy) at present. CPRI has an expected earnings per share (EPS) growth rate of 53.9% for three-five years. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Capri Holdings’ current financial-year EPS suggests growth of 215.8% from the year-ago corresponding figure. CPRI has a trailing four-quarter earnings surprise of 1,018.2%, on average.

Boot Barn Holdings, a lifestyle retailer of western and work-related footwear, apparel and accessories, presently has a Zacks Rank of 2. BOOT has an expected EPS growth rate of 20% for three-five years.

The Zacks Consensus Estimate for Boot Barn Holdings’ current financial-year sales and EPS suggests growth of 62.6% and 220.8%, respectively, from the year-ago corresponding figures. BOOT has a trailing four-quarter earnings surprise of 47.1%, on average.

Tapestry, a renowned designer of fine accessories, presently carries a Zacks Rank #2. TPR has a trailing four-quarter earnings surprise of 28.2%, on average.

The Zacks Consensus Estimate for Tapestry’s current-year sales and EPS suggests growth of 17.5% and 22.9%, respectively, from the corresponding year-ago levels. TPR has an expected EPS growth rate of 12.5% for three-five years.