Macy’s Q2 falls short; announces new omnichannel, global initiatives

Cincinnati -- Macy’s on Wednesday announced several key initiatives to drive its growth going forward, ranging from new store ventures to digital efforts to an international foray.



The news came as the department store giant reported a drop in second quarter sales and earnings amid a strong U.S. dollar and the lingering impact of the West Coast ports shutdown. On the global front, Macy’s announced it is forming a joint venture with Fung Retailing to create an e-commerce store for Chinese consumers on Alibaba’s Tmall Global shopping site.



“Millions of Chinese have come to know and love Macy’s when they live in the United States or travel to New York, San Francisco, Chicago and other American destinations. By making Macy’s accessible in China, we have an opportunity to deepen our relationship with domestic and international customers and to grow sales,” said Terry J. Lundgren, chairman and CEO of Macy’s, in a statement.



Macy’s Chinese venture comes as the retailer begins to get serious about international growth. Last year, it announced it would open its first store outside U.S. borders, in Abu Dhabi, in 2018.



Macy’s said it is ramping up its fast-growing online business through integrated omnichannel buying and planning of merchandise, as well as more strategic placement of inventories in stores and online fulfillment centers. As previously announced, Macy’s and Bloomingdale’s are expanding same-day delivery service to additional markets. Also, the first six of its new off-price format, Macy’s Backstage, in the metro New York City area are expected to be in open in time for the holiday season. Additional Backstage stores will be rolled out next year.



In addition, Macy’s plans to open another 10 Bluemercury free-standing specialty beauty and spa locations before the end of 2015, bringing its store count to 76. Bluemercury is using Macy’s omnichannel and digital expertise to improve its own e-commerce offering and drive online sales. Four Bluemercury stores within Macy’s locations will be opened this fall.



Financial results: The international and expanded omnichannel efforts come on the heels of second quarter sales and earnings that fell short of analysts’ expectations. Macy's also cut its outlook on total sales for 2015 and now forecasts an approximate 1% decline, compared to previous guidance for growth of about the same.



For the second quarter ended Aug. 1, the company’s net profit declined to $217 million, from $292 million in the year- ago period.



Revenue fell to $6.1 billion, from $6.27 billion a year ago. Same-store sales on an owned plus licensed basis fell 1.5% in the second quarter. On an owned basis, they were down by 2.1%.



“We are disappointed in our second quarter results, which were impacted by a variety of factors, both internal to the company and in the macroeconomic environment,” said Lundgren. “We expect an improvement in trend beginning in the second half of 2015 based on a range of promising new strategic initiatives, including those initially announced in January, which we believe will transform our company in the years ahead.”