Analysis: This is what saved Christmas for Macy’s

Macy’s Inc.’s November and December comparable sales fell by 0.7% on an owned basis and by 0.6% on an owned plus licensed basis. Digital performed relatively well, but performance from stores was more mediocre.

Unlike last year, Macy’s did not deliver sales growth. While not particularly surprising, this remains disappointing and underlines the various ongoing challenges faced by the iconic department store. That said, the 0.7% decline in comparables is nowhere near as bad as it could have been and represents a marked improvement from the dismal third quarter when comparable sales declined by 3.9%.
 
Macy’s was inevitably helped by a relatively robust consumer economy where shoppers were happily spending online and in-stores. This lifted the whole retail sector. Without this fillip, which likely won’t be repeated as we move into 2020, Macy’s results would have been considerably worse. That said, Macy’s performance against the backdrop of a total retail market that grew by around 3.7% across November and December, shows the group is still losing customers and market share at a rapid clip.
 
Macy’s does deserve some credit for preventing a worse result. The stores where it has been focusing investment – the so-called Growth150 group – looked very festive and showcased some solid ranges, especially within gifting. The results from this segment were relatively strong. Online performed well too, thanks to a reasonable assortment and convenient delivery and pickup options. Together, these two parts of the business saved Christmas for Macy’s.
 
Outside of these divisions, performance was weak. Most legacy stores, of which Macy’s has a very long tail, looked shabby and lacked festive cheer. In our view, they remain unfit for purpose and there is a big question mark over their long-term future. Yesterday’s decision to shutter a handful of underperforming locations is a foretaste of things to come if Macy’s does not invest in and reinvigorate these outlets.
 
Overall, we are satisfied with Macy’s holiday performance, mainly because it could have been worse. Not a ringing endorsement, but better than the usual opprobrium the group so often attracts.