Macy’s expects positive result in sales from Biden’s stimulus checks

RETAILERS are expected to benefit from another wave of stimulus-driven consumer spending in the coming months, if the US Congress agreed to pass its President Joe Biden’s support plan that includes sending a US$1,400 check to households.

For America’s leading retail experience Macy’s Inc, that might mean sales largely above Wall Street’s estimates on Tuesday, with major gains expected.

This is backed by its growing online business and the return of customers to its physical stores once the COVID-19 vaccinations start to curb the pandemic’s impact.

The upbeat outlook from Macy’s follows better-than-expected results in the holiday quarter as stimulus checks and strong online demand eased the blow from the health crisis.

It’s CEO Jeff Gennette said Macy’s expects the first half of 2021 to be “very similar” to the fourth quarter, ended Jan 30.

Macy’s expects sales between US$19.75 bil and US$20.75 bil for 2021, compared with analysts’ estimates of US$20.13 bil, according to IBES data from Refinitiv. Still the company forecast full-year profits below expectations.

“The back half, we’ll start to see an improvement in apparel, but remain strong in the categories that have been strong,” she stated.

With homebound shoppers reducing purchases of formal work attire and dresses, Macy’s saw casual apparel, home and beauty perform well in the holiday quarter.

It added also new categories to meet emerging demand, including baby gear, skin care devices, home fragrances, outdoor recreation, and gourmet food.

Shares in the company, which have risen 29% in the past three months, were volatile Tuesday morning, trading up during a post-earnings call with investors and then slumping as much as 8%. The shares were roughly flat in late morning trading.

CFRA analyst Camilla Yanushevsky called Macy’s a “COVID-19 survivor” but added that in the long term department stores’ “operating models and valuations are simply not sustainable.”

Becoming digitally-led

Much of the growth expected in 2021 may be driven by Macy’s digital business. The company now expects annual online sales to reach US$10 bil within the next three years.

In the fourth quarter, online sales jumped 21% as the company pushed for faster delivery times with stores being used for fulfilment. That helped reduce inventory levels, and attract new and younger customers.

Still, same-store sales on an owned basis dropped 17% in the fourth quarter, compared with Wall Street estimates of a 16.6% fall, according to IBES data from Refinitiv.

Forced to shutter stores for months and revamp business strategies almost completely, department stores have been among the hardest hit during the pandemic, compared with “essential” retailers such as Walmart and Target.

Macy’s net sales fell about 19% to US$6.78 bil in the fourth quarter, but beat estimates of US$6.50 bil. Excluding one-time items, its profit was 80 cents per share, above expectations of 12 cents. – Feb 24, 2021

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