Macy’s Inc. significantly raised its earnings outlook for the year after reporting third-quarter results that exceeded expectations. Comparable sales jumped 35.6 percent versus 2020 and 8.7 percent versus 2019.

Earnings per share came in a $1.23 on an adjusted basis, up from Wall Street’s consensus estimate of 31 cents. Sales were $5.4 billion, topping  Wall Street’s consensus estimate of $5.2 billion.

“Our company delivered another strong quarter and exceeded our expectations on both top and bottom lines. The results were driven by the effective execution of the Polaris strategy and an improved economic environment. In the quarter, the Macy’s brand added 4.4 million new customers. Consumers continue to spend, and we successfully offered a wide range of expanding merchandise assortment to meet their growing demand,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc. “Looking ahead to the fourth quarter, we remain a special place for holiday shopping, and our robust omnichannel ecosystem is showing resilience in the face of labor and supply chain challenges and enables us to meet customer shopping needs with speed and convenience.”

“We are encouraged by the momentum of our business and its strong financial health and continue to invest in positioning our company for long-term sustainable and profitable growth,” Gennette continued. “Today, we are announcing plans to launch a curated digital marketplace platform that will further fuel customer acquisition and sales growth across all of our channels.”

Additional details about the new digital marketplace platform will be provided in a dedicated press release.

Third Quarter Highlights
In addition to prior-year comparisons, Macy’s, Inc. is providing comparisons to 2019 to benchmark its performance given the impact of the pandemic last year.

  • Diluted earnings per share of $0.76 and Adjusted diluted earnings per share of $1.23 both exceeded expectations for the quarter.
    • This compares to a diluted loss per share of $(0.29) and an Adjusted diluted loss per share of $(0.19) in third-quarter 2020.
    • This compares to diluted earnings per share of $0.01 and Adjusted diluted earnings per share of $0.07 in third-quarter 2019.
    • In the third quarter 2021, Adjusted diluted earnings per share exclude the charges related to the recognition of fees associated with the early retirement of debt.
  • Comparable sales up 37.2 percent on an owned basis and up 35.6 percent on an owned-plus-licensed basis versus 2020; up 8.9 percent and up 8.7 percent, respectively, versus 2019.
    • On a comparable owned-plus-licensed basis, the third quarter 2021 includes a 200-basis point benefit resulting from the shift of the Friends and Family promotional event into the third quarter from the fourth quarter as compared to 2019.
  • Digital sales increased 19 percent versus third quarter 2020 and grew 49 percent versus third quarter 2019.
    • Digital penetration was 33 percent of net sales, a 5-percentage point expected decline from third quarter 2020, but a 10-percentage point improvement over third quarter 2019.

Highlights of the company’s nameplates include:

    • Macy’s comparable sales were up 36.4 percent on an owned basis and up 35.1 percent on an owned-plus-licensed basis compared to the third quarter of 2020, and up 9.0 percent and 8.4 percent, respectively, compared to the third quarter of 2019.
      • Approximately 4.4 million new customers shopped the Macy’s brand, a 28 percent increase compared to third quarter 2019, with 41 percent of these customers coming through the digital channel in third quarter 2021;
      • Platinum, Gold and Silver customers in the Star Rewards Loyalty program continued to engage, with the average customer spend up 16 percent compared to the third quarter of 2019;
      • The Bronze segment of the Star Rewards Loyalty program, its youngest and most diverse loyalty tier, continued to grow with the addition of 2.3 million new members during the quarter;
      • Categories that were solid throughout the pandemic, including home, fragrances, jewelry, watches and sleepwear, continued to see strong sales performance;
      • Occasion-based categories, such as dresses, men’s tailored and luggage, continued to recover; and
      • Emerging categories, such as toys and pets, showed encouraging results and the company continues to expand on those categories and related brands.
    • Bloomingdale’s comparable sales on an owned basis were up 43.4 percent and on an owned-plus-licensed basis were up 38.5 percent compared to the third quarter of 2020, and up 9.1 percent and 11.2 percent, respectively, compared to the third quarter of 2019.
      • Results were driven by strong sales of luxury handbags, fine jewelry, home, men’s shoes and contemporary apparel.
    • Bluemercury comparable sales were up 39.5 percent on an owned and owned-plus-licensed basis compared to the third quarter of 2020, but down 2.2 percent on an owned and owned-plus-licensed basis compared to the third quarter of 2019.
      • Private brands, home fragrance and treatment showed strong sales performance during the quarter.
  • Gross margin for the quarter was 41.0 percent, up from 35.6 percent in third quarter 2020 and up 100 basis points from third quarter 2019.
    • Improvement as a result of merchandise margin was largely due to benefits from pricing, promotion and inventory productivity enhanced by the Polaris strategy.
    • Delivery expense as a percent of net sales increased 170 basis points from third quarter 2019, due to increased digital penetration.
  • Inventory was up 19.4 percent from third quarter 2020 but down 15.4 percent from third quarter 2019.
    • Compared to 2020, the company has increased inventory to meet demand in stores and online. The company implemented several measures to mitigate supply chain disruptions and does not expect to be materially impacted during the fourth quarter 2021.
  • Selling, general and administrative (“SG&A”) expense of $1.97 billion, a $229 million improvement from third quarter 2019.
    • SG&A expense as a percent of sales was 36.3 percent, an improvement of 630 basis points from third quarter 2019.
    • The quarter benefited from disciplined expense management and improved productivity resulting from the company’s Polaris strategy, including the permanent cost savings realized in 2020, along with reduced labor costs due to elevated job openings in stores.
  • Net credit card revenue of $213 million, up $30 million from third quarter 2019.
    • Represented 3.9 percent of sales, 100 basis points lower than third quarter 2020 and 40 basis points higher than third quarter 2019.
    • Improved bad debt levels driven by strong customer credit health continued to contribute to the growth of credit card revenue.
  • Strong cash generation year-to-date allowed for execution of capital allocation priorities:
      • Repurchased $300 million of shares, accounting for 60 percent of the $500 million authorization.
      • Repaid early $294 million of debt due in January 2022 in addition to the early repayment of the previously announced $1.3 billion senior secured notes in August.
      • Paid $46 million in cash dividends to shareholders.

Revised Full-Year 2021 Guidance
The company is narrowing and raising its full-year 2021 guidance:

  • Sales are now expected in the range of $24.12 billion to $24.28 billion, up from previous guidance of $23.55 billion to $23.95 billion;
  • Adjusted diluted earnings per share is now expected in the range of $4.57 – $4.76, up from previous guidance of $3.41 – $3.75; and
  • Adjusted EBITDA as a percent of sales are now expected in the range of greater than 12.5 percent, up from previous guidance in the range of 11 percent to 11.5 percent