Macy’s on Tuesday reported earnings and sales for the holiday quarter that beat analysts’ expectations.
already said it had a weak holiday season. Last month, the department store chain said traffic at stores softened during the middle of December and didn’t pick back up like Macy’s was anticipating until Christmas week. Macy’s had called out categories including women’s sportswear, sleepwear, fashion jewelry, fashion watches and cosmetics as underperforming through the holidays.
Now, analysts and investors are skeptical Macy’s investments to grow sales will ultimately pay off. Macy’s has added pop-up shops for online brands in its stores, experimented with virtual reality headsets to sell furniture, rolled out a mobile checkout option, revamped its mobile app, and grew its off-price business, Macy’s Backstage. The department store chain has also said it plans to start downsizing some locations, as it doesn’t need as much real estate.
Still, Macy’s faces the same challenges as struggling rivals Sears and J.C. Penney. It must find ways to keep its stores relevant as shoppers are increasingly steering clear of department stores in favor of shopping with brands — like Nike, Coach or Canada Goose — directly. The shopping malls where Macy’s is positioned as an anchor are, likewise, trying to lure people in. With e-commerce sales on the rise, foot traffic has dropped.
“While Macy’s company specific sales drivers (i.e. Backstage, Growth 50, Vendor Direct, etc.) look good on paper … they failed to manifest when it mattered most, leaving us more skeptical that they can deliver upside in 2019,” Gordon Haskett analyst Chuck Grom said ahead of Tuesday’s report.
Macy’s weak holiday sales “came despite a strong consumer environment with favorable trends on both the tourism and weather fronts,” he added.
As of Monday’s market close, Macy’s shares are down nearly 20 percent so far this year, bringing the company’s market cap to about $7.4 billion.
This is a developing story. Please check back for updates.