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Macy's (M) Polaris Strategy & Digital Efforts Bode Well
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Macy's (M - Free Report) has been making smart moves to enhance customers’ shopping experience. M’s omnichannel capabilities including digital efforts and Polaris strategy appear quite encouraging. Management has been strengthening its omnichannel capabilities with investments in online shopping experiences, data and analytics, technology infrastructure as well as better fulfillment capabilities. Impressively, this Zacks Rank #3 (Hold) company’s shares have increased 23.7% in the past three months, outperforming the industry’s 10.2% growth.
Let’s Delve Deep
Macy’s has undertaken initiatives to expand market share and better engage with customers. M is ramping up digital capabilities to provide better digital experiences. Its launch of Macy’s Marketplace includes a wide range of product categories, such as pets, home, kids, baby and maternity, beauty and health, as well as toys and electronics. Management plans to expand Toys “R” Us to every Macy’s location. The company is repositioning its physical store footprint to better serve customers and support omnichannel market sales growth. In the third quarter of fiscal 2022, Macy’s introduced 11 locations, bringing the total to 28. The company has also introduced its second Bloomie's in the Chicago land area.
Macy's three-year Polaris strategy is believed to adapt better to the evolving retail ecosystem. This includes strengthening customer relationships, expansion of assortments, accelerating digital growth, optimizing store portfolio and reducing costs. Moreover, the company’s expanded Star Rewards Loyalty program, which was initiated in 2018, has been aiding better customer engagement. This was evident in the third quarter of fiscal 2022. Star Rewards program members made up roughly 70% of the total Macy's brand-owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year.
Image Source: Zacks Investment Research
On a trailing 12-month basis, 43.6 million active customers shopped for the Macy’s brand, up 2% year over year. Roughly 4.1 million active customers shopped for the Bloomingdale’s brand, reflecting an increase of 9% from the year-ago period. About 650,000 active customers shopped for the Bluemercury brand, representing a year-over-year increase of 15%. Macy's is also aiming for around five off-mall locations in fiscal 2022, a mix of Market by Macy’s, Freestanding Backstage, Bloomie’s and Bloomingdale’s the Outlet.
We note that Macy’s collaboration with the Swedish buy now, pay later group Klarna, is enabling the company to offer shoppers 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. The company’s tie-up with DoorDash for expedited delivery service is also encouraging. Markedly, redesigned mobile app, live shopping functionality, and addition of payment options such as Apple Pay, Klarna Express Checkout, PayPal and Venmo have been making shopping easier for customers.
Macy’s has also launched a digital marketplace, featuring a collection of new brands, products and categories from third-party sellers. Also, Market by Macy's initiative plays an important role in the company’s omnichannel market ecosystem. Currently, the company operates eight Market by Macy's. To power the platform, Macy’s has partnered with Mirakl — a leading enterprise marketplace technology company. Selected third-party merchants will sell products on macys.com and bloomingdales.com.
Macy’s expanded omnichannel offerings such as curbside, store pickup and same-day delivery bode well. During the third quarter of fiscal 2022, the company’s digital penetration was 30% of net sales in the quarter under review. Approximately 65% of digital demand sales came from mobile devices. Stores fulfilled 29% of digital sales in the quarter. Digital penetration was 31%, 35% and 19%, respectively, at Macy’s, Bloomingdale’s and Bluemercury brands during the quarter under discussion. We note that Macy’s app active customers increased 11% year over year to 7.6 million. Digital sales are likely to be roughly 33% of net sales for fiscal 2022.
Macy’s projected fiscal 2022 net sales in the bracket of $24,340-$24,580 million and comparable owned-plus-licensed sales to be flat to up 1%. Management forecast credit card revenues, net, to be 3.4% of net sales, up from the previous expectation of 3.3% of net sales. For the fourth quarter of fiscal 2022, management anticipated net sales between $8,161 million and $8,401 million compared with the net sales of $8,340 million reported in the year-ago fiscal period.
All in all, Macy’s appears to be poised well for future growth. A VGM Score of B coupled with an expected long-term earnings growth rate of 12% further speaks volumes.
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently sports a Zacks Rank of 1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the year-ago reported numbers.WING has an expected EPS growth rate of 11% for three-five years.
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Macy's (M) Polaris Strategy & Digital Efforts Bode Well
Macy's (M - Free Report) has been making smart moves to enhance customers’ shopping experience. M’s omnichannel capabilities including digital efforts and Polaris strategy appear quite encouraging. Management has been strengthening its omnichannel capabilities with investments in online shopping experiences, data and analytics, technology infrastructure as well as better fulfillment capabilities. Impressively, this Zacks Rank #3 (Hold) company’s shares have increased 23.7% in the past three months, outperforming the industry’s 10.2% growth.
Let’s Delve Deep
Macy’s has undertaken initiatives to expand market share and better engage with customers. M is ramping up digital capabilities to provide better digital experiences. Its launch of Macy’s Marketplace includes a wide range of product categories, such as pets, home, kids, baby and maternity, beauty and health, as well as toys and electronics. Management plans to expand Toys “R” Us to every Macy’s location. The company is repositioning its physical store footprint to better serve customers and support omnichannel market sales growth. In the third quarter of fiscal 2022, Macy’s introduced 11 locations, bringing the total to 28. The company has also introduced its second Bloomie's in the Chicago land area.
Macy's three-year Polaris strategy is believed to adapt better to the evolving retail ecosystem. This includes strengthening customer relationships, expansion of assortments, accelerating digital growth, optimizing store portfolio and reducing costs. Moreover, the company’s expanded Star Rewards Loyalty program, which was initiated in 2018, has been aiding better customer engagement. This was evident in the third quarter of fiscal 2022. Star Rewards program members made up roughly 70% of the total Macy's brand-owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year.
Image Source: Zacks Investment Research
On a trailing 12-month basis, 43.6 million active customers shopped for the Macy’s brand, up 2% year over year. Roughly 4.1 million active customers shopped for the Bloomingdale’s brand, reflecting an increase of 9% from the year-ago period. About 650,000 active customers shopped for the Bluemercury brand, representing a year-over-year increase of 15%. Macy's is also aiming for around five off-mall locations in fiscal 2022, a mix of Market by Macy’s, Freestanding Backstage, Bloomie’s and Bloomingdale’s the Outlet.
We note that Macy’s collaboration with the Swedish buy now, pay later group Klarna, is enabling the company to offer shoppers 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. The company’s tie-up with DoorDash for expedited delivery service is also encouraging. Markedly, redesigned mobile app, live shopping functionality, and addition of payment options such as Apple Pay, Klarna Express Checkout, PayPal and Venmo have been making shopping easier for customers.
Macy’s has also launched a digital marketplace, featuring a collection of new brands, products and categories from third-party sellers. Also, Market by Macy's initiative plays an important role in the company’s omnichannel market ecosystem. Currently, the company operates eight Market by Macy's. To power the platform, Macy’s has partnered with Mirakl — a leading enterprise marketplace technology company. Selected third-party merchants will sell products on macys.com and bloomingdales.com.
Macy’s expanded omnichannel offerings such as curbside, store pickup and same-day delivery bode well. During the third quarter of fiscal 2022, the company’s digital penetration was 30% of net sales in the quarter under review. Approximately 65% of digital demand sales came from mobile devices. Stores fulfilled 29% of digital sales in the quarter. Digital penetration was 31%, 35% and 19%, respectively, at Macy’s, Bloomingdale’s and Bluemercury brands during the quarter under discussion. We note that Macy’s app active customers increased 11% year over year to 7.6 million. Digital sales are likely to be roughly 33% of net sales for fiscal 2022.
Macy’s projected fiscal 2022 net sales in the bracket of $24,340-$24,580 million and comparable owned-plus-licensed sales to be flat to up 1%. Management forecast credit card revenues, net, to be 3.4% of net sales, up from the previous expectation of 3.3% of net sales. For the fourth quarter of fiscal 2022, management anticipated net sales between $8,161 million and $8,401 million compared with the net sales of $8,340 million reported in the year-ago fiscal period.
All in all, Macy’s appears to be poised well for future growth. A VGM Score of B coupled with an expected long-term earnings growth rate of 12% further speaks volumes.
Solid Picks in Retail
We highlighted three top-ranked stocks, namely Tecnoglass (TGLS - Free Report) , GMS (GMS - Free Report) and Wingstop (WING - Free Report) .
Tecnoglass manufactures and sells architectural glass and windows, and aluminum products for the residential and commercial construction industries. TGLS currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Tecnoglass’ current financial-year sales and earnings per share suggests growth of 40.5% and 76.4%, respectively, from the year-ago reported figures. TGLS has a trailing four-quarter earnings surprise of 26.9%, on average.
GMS, a distributor of wallboard and suspended ceiling systems, currently sports a Zacks Rank of 1. GMS has a trailing four-quarter earnings surprise of 10.8%, on average.
The Zacks Consensus Estimate for GMS’ current financial-year sales and EPS suggests growth of 10.8% and 10.2%, respectively, from the year-ago reported figures. GMS has an expected EPS growth rate of 10.7% for three-five years.
Wingstop, which franchises and operates restaurants, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 5.8%, on average.
The Zacks Consensus Estimate for Wingstop’s current financial-year sales and earnings per share suggests growth of 25.3% and 22.2%, respectively, from the year-ago reported numbers.WING has an expected EPS growth rate of 11% for three-five years.