Macy’s Q4 and full-year 2020 results show signs of a turnaround for the department store, hard hit, like many of its counterparts, by the COVID-19 pandemic.
Net income for the 13 weeks ended Jan. 31, 2021 was $160 million, putting the company back in the black but still down significantly from the $340 million generated in the same quarter the previous year.
Comparable sales at owned stores in the quarter were down 17%, beating expectations but showcasing the continued dampening effect of COVID-19. The retailer said it expects “continued pandemic-related challenges in the spring season,” but has high hopes for the second half of the year as it focuses on recovery and rebuilding in 2021.
“Performance was driven by the home, beauty, jewelry and watch categories, growth in digital sales and by acquiring new customers,” said Jeff Gennette, Chairman and CEO of Macy’s in a statement. “Our investments in digital innovation continued to pay off in the quarter, with digital sales up 21% from 2019. We anticipate annual digital sales to reach $10 billion within the next three years, and that digital will become an even more profitable contributor to our business.”
Digital accounted for 44% of net sales in Q4 2020, and the retailer also highlighted the fact that 25% of its digital sales were fulfilled from its brick-and-mortar stores via curbside pickup and same-day delivery. The increasing prominence of digital reflects the company’s “Polaris” omnichannel transformation strategy.
“The Polaris strategy proved to be a critical enabler of our performance in 2020, allowing us to adapt and innovate with agility during the pandemic,” said Gennette. “Early actions guided by Polaris helped us broaden fashion categories including home, beauty and casual apparel, and improve the digital experience. Additionally, the cost controls we committed to in February were key in helping us weather the pandemic. When we needed to make hard choices on our investments, Polaris gave us the clarity to focus first on the areas most critical to growth.”
Macy’s reported that its inventory was down 27% compared to Q4 2020, part of an effort to address slow-selling merchandise and reduce excess inventory levels. The company also highlighted a 45% increase in Bronze tier members of its Star Rewards Loyalty program over the course of 2020, part of its under-40 strategy to court younger consumers.
“Department stores remain in the eye of the storm as mall traffic and apparel demand remain weak, trends that we expect to continue at least through the first half of 2021,” said Christina Boni, VP at Moody’s Investors Service in comments provided to Retail TouchPoints. “Investments in technology and supply chain will be needed to support the accelerated shift to digital. Macy’s has managed its liquidity with a benefit from working capital, while navigating the challenging environment with inventories declining 27% and cash of approximately $1.7 billion and no revolver borrowings.”