Coverage: Macy’s stock soars on strong same-store sales

Department store Macy’s saw its stock rise by more than 12 percent in Tuesday trading after it reported that its January same-store sales rose by 3 percent, a sign that its turnaround plan is working.

Lauren Thomas and Courtney Reagan of CNBC had the story:

Some of Macy’s latest initiatives to get back to growth include closing unprofitable stores, reducing promotional activity, opening more off-price shops under its Backstage banner and growing its Bluemercury beauty business. Gennette also told CNBC that new U.S. tax legislation has given the company “flexibility” to accelerate those plans.

This year, for example, Macy’s will invest more money in 50 locations, as part of a plan known as “Growth 50.” The company has been using a New Jersey store as a “lab” to see how shoppers react to new lighting and mobile checkout, among other upgrades. Soon, those upgrades will hit more stores in a bid to keep shoppers interested in bricks and mortar.

Meanwhile, by the end of 2018, Macy’s will have opened 100 Backstage locations, some of which are planned to open inside its existing stores in “premium malls.” Gennette told CNBC that the presence of Backstage in current locations is lifting sales “more now than before” — roughly 7 percentage points per store.

These moves are expected to be the “spine” of the company as it forges ahead in an evolving retail environment, the CEO said Tuesday on a call with analysts and investors. “Healthy stores mean a healthy business.”

Paul R. LaMonica of CNNMoney.com reported that Macy’s is also selling real estate and focusing on its beauty stores:

And the company is still investing heavily in its Bluemercury chain of specialty beauty stores and the discount outlet Backstage. Macy’s said it opened 36 Bluemercury stores and 30 Backstage stores last year, even as it closed 16 Macy’s stores.

Gennette added during a conference call with analysts that Macy’s plans to open 100 more Backstage locations this year, including in malls.

Macy’s is also selling real estate to shore up its balance sheet. The company said it raised $411 million last year and $1.3 billion over the past three years by getting rid of some stores, warehouses and parking garages.

Macy’s is also working with real estate company Brookfield Asset Management on other transactions.

Sarah Halzack of Bloomberg Gadfly wrote that the retailer expects same-store sales to be slightly up in 2018:

And the retailer suggested it expects to keep up the momentum, with an outlook for comparable sales to be flat to up 1 percent in 2018.

It may seem a bit puzzling that investors sent Macy’s stock up in early trading. The company reported back in January that comparable sales were up 1 percent during the November and December holiday rush from a year earlier, foretelling the full quarter’s increase.

But it’s noteworthy the quarter’s gains were even higher than for the holiday period alone, hinting Macy’s had a rather strong January and kept shoppers coming to its stores even after the Christmas frenzy ended.

It may have helped that much of the U.S. got a wave of wintry weather in January. That likely spurred demand for boots, scarves and other such gear after a slow fall — third-quarter sales of cold-weather merchandise were about $50 million lower than expected due to unseasonably warm weather, Macy’s executives said in November. But even if the strong January partly just captured sales that might otherwise have come earlier, it’s encouraging that shoppers chose to stock up at Macy’s and not one of its competitors.