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Macy's (M) Gains From Business Strength Despite Headwinds
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Macy's, Inc. (M - Free Report) has been benefiting from strength in beauty, fragrances, prestige cosmetics, men’s tailored and women’s career sportswear categories. As the departmental store chain looks to enhance its customer engagement and grow market share, it is progressing well in reimagining its private brands. Impressively, the company concluded the second quarter of fiscal 2023 with 1,350 brands and grew its gross merchandise value by more than 116% from the first quarter. Macy’s is repositioning its physical store footprint to better serve customers and support omnichannel market sales growth.
The company has undertaken initiatives to gain market share, better engage with customers and maintain a decent financial profile. It recently launched mstylelab, an innovative fashion platform built on the metaverse infrastructure solution, Journee. As part of the company’s web3 digital strategy, mstylelab provides a virtual platform for style inspiration and fashion immersion experiences for its customers. This apart, its launch of Macy’s Marketplace encompassed products in a wide range of categories, such as pets, home, kids, baby and maternity, beauty and health and toys and electronics.
Macy's’ expanded Star Rewards Loyalty program, initiated in 2018, has been aiding better customer engagement. This was evident in the second quarter of fiscal 2023. Star Rewards program members made up roughly 72% of the overall Macy's brand-owned-plus-licensed sales on a trailing twelve-month basis, up approximately 3 percentage points compared with the prior year.
The company is ramping up its small-format store initiative, with plans to introduce up to 30 additional locations in the United States by fall 2025. These compact stores are designed to provide customers with a premium shopping experience in high-traffic areas. This strategic move will complement 15 small-format stores already operating under the Macy's and Bloomie's banners and drive long-term sales growth.
However, Macy's has been grappling with waning consumer confidence and a pullback in spending activity of late. Weakness in the company’s credit card segment, owing to an increased rate of delinquencies within the credit card portfolio, has been impacting its top-line performance of late. The softness is expected to persist in its credit card portfolio throughout the fiscal year and affect its top-line performance. For fiscal 2023, it anticipates its net sales in the range of $22.8-$23.2 billion, reflecting a decline from $24.4 billion reported in fiscal 2022.
The company has been experiencing escalating operating costs and expenses over time. For instance, in the first six months of fiscal 2023, its selling, general & administrative (SG&A) expenses increased by 0.3% year-over-year to $3,930 million. For fiscal 2023, M’s SG&A expenses are expected to be about 36.4-36.7% of net sales.
Macy's also operates in the highly competitive retail industry, comprising department stores, specialty stores and general merchandise stores. The company, which belongs to the Zacks Retail - Regional Department Stores industry, faces stiff competition from several competitors like Kohl's Corporation (KSS - Free Report) , Ross Stores, Inc. (ROST - Free Report) and Burlington Stores, Inc. (BURL - Free Report) .
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Macy's (M) Gains From Business Strength Despite Headwinds
Macy's, Inc. (M - Free Report) has been benefiting from strength in beauty, fragrances, prestige cosmetics, men’s tailored and women’s career sportswear categories. As the departmental store chain looks to enhance its customer engagement and grow market share, it is progressing well in reimagining its private brands. Impressively, the company concluded the second quarter of fiscal 2023 with 1,350 brands and grew its gross merchandise value by more than 116% from the first quarter. Macy’s is repositioning its physical store footprint to better serve customers and support omnichannel market sales growth.
The company has undertaken initiatives to gain market share, better engage with customers and maintain a decent financial profile. It recently launched mstylelab, an innovative fashion platform built on the metaverse infrastructure solution, Journee. As part of the company’s web3 digital strategy, mstylelab provides a virtual platform for style inspiration and fashion immersion experiences for its customers. This apart, its launch of Macy’s Marketplace encompassed products in a wide range of categories, such as pets, home, kids, baby and maternity, beauty and health and toys and electronics.
Macy's’ expanded Star Rewards Loyalty program, initiated in 2018, has been aiding better customer engagement. This was evident in the second quarter of fiscal 2023. Star Rewards program members made up roughly 72% of the overall Macy's brand-owned-plus-licensed sales on a trailing twelve-month basis, up approximately 3 percentage points compared with the prior year.
The company is ramping up its small-format store initiative, with plans to introduce up to 30 additional locations in the United States by fall 2025. These compact stores are designed to provide customers with a premium shopping experience in high-traffic areas. This strategic move will complement 15 small-format stores already operating under the Macy's and Bloomie's banners and drive long-term sales growth.
However, Macy's has been grappling with waning consumer confidence and a pullback in spending activity of late. Weakness in the company’s credit card segment, owing to an increased rate of delinquencies within the credit card portfolio, has been impacting its top-line performance of late. The softness is expected to persist in its credit card portfolio throughout the fiscal year and affect its top-line performance. For fiscal 2023, it anticipates its net sales in the range of $22.8-$23.2 billion, reflecting a decline from $24.4 billion reported in fiscal 2022.
The company has been experiencing escalating operating costs and expenses over time. For instance, in the first six months of fiscal 2023, its selling, general & administrative (SG&A) expenses increased by 0.3% year-over-year to $3,930 million. For fiscal 2023, M’s SG&A expenses are expected to be about 36.4-36.7% of net sales.
Macy's also operates in the highly competitive retail industry, comprising department stores, specialty stores and general merchandise stores. The company, which belongs to the Zacks Retail - Regional Department Stores industry, faces stiff competition from several competitors like Kohl's Corporation (KSS - Free Report) , Ross Stores, Inc. (ROST - Free Report) and Burlington Stores, Inc. (BURL - Free Report) .