Macy’s Inc. reported its online sales increased 12% year over year for its fiscal fourth quarter ended Jan. 29, 2022, and increased 36% compared with fiscal Q4 2019. Its ecommerce operations are profitable, CEO Jeff Gennette told investors, and stores coupled with ecommerce will be vital for Macy’s future.
“The role of stores has evolved with customer shopping habits,” Gennette said in an earnings call, according to a SeekingAlpha transcript. “The interplay between our digital and physical assets is critical, and we remain focused on sustainable omnichannel sales growth.”
For example, Macys’ omnichannel shoppers — or consumers who shop both in stores and online — spend 1.5 to 3.5 times more than consumers who only shop in one channel. They also shop with 3.0 to 3.5 times more frequency compared with single-channel shoppers, Macy’s reported. The omnichannel shopper’s average spend increased 10% in 2021 compared with 2019, and they are shopping with the same frequency in 2021 compared with 2019.
Online sales are three times higher in markets with stores than in markets without physical stores, Macy’s reported. In addition, Macy’s is focused on making its stores fulfillment hubs for online orders via curbside pickup, same-day delivery and buy online pickup in store.
“We have delayed most of the remaining closures we earmarked in 2019 in order to maintain a physical presence in many markets while we scale up our off-mall-format stores,” Gennette said.
Stores fulfilled 28% of Macys.com orders in Q4 2021 and 25% of orders for the full year. Macy’s did not provide comparable figures.
Although Macy’s says its online channel is profitable, chief financial officer Adrian Mitchell told investors delivery expense reduction is a top priority. For example, Macy’s wants to decrease split shipments — which is when one order ships in multiple boxes — and increase the efficiency of in-store fulfillment.
“Improving order throughput per labor hour is one initiative that we’re working on, and we have been pleased with the improvements we achieved in the fulfillment test stores that we deployed in November,” Mitchell said. “Based on these results, we plan to roll this initiative out to an additional 35 locations before holiday 2022.” Mitchell did not provide any more specifics.
For Macy’s fiscal year 2021 ended Jan. 29, online sales were 35% of its total sales, down from 44% penetration in 2020, but up from 25% penetration in 2019.
For all of 2021, digital sales increased 13% compared with 2020 and 39% compared with 2019. Macy’s is No. 14 in the 2021 Digital Commerce 360 Top 1000.
Macy’s plans to keep digital part of its core
After rumors of Macy’s spinning off its ecommerce business separate from its stores, Gennette said Macy’s will be remaining one unit.
“In every scenario we considered, we found that the combination of our profitable digital platform with our national footprint will deliver greater value to shareholders than a separation of our digital and physical assets. This was true at both Macy’s, Inc. and brand levels,” Gennette said.
Beyond omnichannel, Macy’s also highlighted several other digital and merchandising initiatives including its new marketplace. Macy’s says it expects its marketplace will help the retailer expand its categories and brands and allow it to respond faster to shopper preferences.
In 2021, Macy’s also began working with toy brand Toys R Us, which allowed Macy’s to double its toys sales in 2021 and helped it add new customer, Gennette said.
“Of the customers that shop Toys R Us, 25% were new customers to the Macy’s brand, and 93% of these toy customers cross-shopped other categories,” Gennette said.
Macy’s also reported that it has streamed about 40 live shopping videos to showcase Macy’s and Bloomingdale’s trends that have yielded nearly a 6% conversion rate. It also now allows shoppers to check out with Apply Pay, PayPal, Venmo and Klarna.
For its fiscal fourth quarter ended Jan. 29, Macy’s reported:
- Net sales of $8.67 billion, up 27.9% from $6.78 billion in 2020 and up 4.0% from $8.34 billion in 2019.
- Comparable sales increased 27.8% on an owned-plus-licensed basis compared with Q4 2020 and increased 6.1% compared with Q4 2019.
- Net income of $742 million, up from $160 million in 2020 and up from a $340 million net income in 2019.
- Macys.com’s conversion rate was 4.47%, up 9% from Q4 2019.
For the full fiscal year ended Jan. 29:
- Net sales of $24.46 billion, up 41.0% from $17.35 billion in 2020 but down 0.4% from $24.56 billion in 2019.
- Comparable sales increased 429% compared with 2020 and 3.0% compared with 2019.
- Net income of $1.43 billion, compared with a net loss of $3.94 billion in 2020 and a net income of $564 million in 2019.
- Macys.com’s conversion rate was 4.24%, up 13% compared with fiscal year 2019.
Percentage changes may not align exactly with dollar figures due to rounding.