Sales growth in fiscal 2018
Macy’s (M) reported sales growth in the first and third quarters of fiscal 2018, while its top line declined in the second quarter. The company’s sales grew 2.3% to $5.4 billion in fiscal 2018’s third quarter, in line with analysts’ forecast. Its sales fell 1.1% in the second quarter and 6.1% in fiscal 2017’s third quarter.
Macy’s third-quarter sales were driven by 3.1% growth in same-store sales (on an owned basis) and double-digit percentage growth in its digital business. Menswear, kids’ clothing, fine jewelry, fragrances, activewear, women’s shoes, and coats performed well in the quarter. However, women’s sportswear and fashion watches failed to impress.
Analysts expect Macy’s sales to fall 2.5% to $8.5 billion in fiscal 2018’s fourth quarter.[1.ended February 2] The fourth quarter includes the important holiday period. Macy’s holiday same-store sales grew 0.7% on an owned basis and 1.1% on an owned-plus-licensed basis in the holiday season (comprising November and December).
Although Macy’s holiday sales disappointed investors, the company was optimistic about delivering same-store sales growth in fiscal 2018’s fourth quarter. Macy’s holiday sales were driven by strength in its fine jewelry, women’s shoes, fragrances, dresses, outerwear, activewear, and home categories.
However, the company’s holiday sales were impacted by underperformance in certain categories (women’s sportswear, seasonal sleepwear, fashion jewelry and watches, and cosmetics). Macy’s holiday sales were also hit by temporary fulfillment challenges caused by a fire at its West Virginia distribution center.
Macy’s revised guidance forecasts that its fiscal 2018 sales will be flat with fiscal 2017’s $24.8 billion. In fiscal 2018, Macy’s expects its same-store sales to grow ~2.0% on an owned-plus-licensed basis, and analysts expect Macy’s sales to rise 0.5% to ~$25.0 billion.
Macy’s digital channels and focus on its beauty business (including in-store Sephora locations), momentum in its Growth50 stores, and expansion into the off-price retail space through Backstage stores are expected to drive its sales growth. However, online retailers’ and established off-price players’ growing strength could be a major roadblock on Macy’s growth path. Next, we’ll look at Macy’s earnings.