Macy's, Inc. M has been making smart moves to enhance customers’ shopping experience. The company is ramping up digital capabilities to provide seamless omnichannel experiences. It has also been progressing well on its Polaris strategy, which includes boosting digital capabilities and attaining operating efficiency.
Over the past three months, the department store chain’s shares have surged 76.2%, outperforming the industry’s 36.2% growth.
Let’s Delve Deeper
Management is on track to strengthen its omnichannel capabilities with investments in online shopping experiences, data and analytics, technology infrastructure as well as better fulfillment capabilities. Macy’s expanded its omnichannel offerings such as curbside, store pickup and same-day delivery bode well. The launch of Macy’s Marketplace encompassed products in a wider range of categories, such as pets, home, kids, baby and maternity, beauty, health, toys and electronics.
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Digital sales are likely to account for one-third of net sales in fiscal 2023. The company is progressing well with reimagining its private brands. Impressively, NDSN concluded the third quarter of fiscal 2023 with 1,500 brands on the platform and grew its gross merchandise value by about 22% on a consecutive quarterly basis.
The company is repositioning its physical store footprint to better serve customers and support omnichannel market sales growth. It is ramping up its small-format store initiative, with openings across Macy's and Bloomie's locations. Presently, it operates 15 small-format locations, including 12 Macy's and three Bloomie's. These stores, about one-fifth the size of its larger counterparts, are designed to provide customers with a premium shopping experience in high-traffic areas. Shoppers can expect to find a mix of Macy's private brands and popular market brands in these smaller outlets. Moving ahead, it plans to open up to 30 additional small-format Macy's locations through fall 2025, alongside expanding Bloomie's locations.
Additionally, Macy’s collaboration with the Swedish buy now, pay later group Klarna is enabling the company to offer shoppers financial ease and payment flexibility with their online purchases. The company’s tie-up with DoorDash for expedited delivery service is also encouraging. Markedly, the redesigned mobile app, live shopping functionality and addition of payment options such as Apple Pay, Klarna Express Checkout, PayPal and Venmo have been making shopping easier for customers.
Macy's Polaris Strategy to adapt better to the evolving retail ecosystem also bodes well. This includes strengthening customer relationships, expanding assortments, accelerating digital growth, optimizing store portfolio and reducing costs. Moreover, the company’s expanded Star Rewards Loyalty program has been enhancing customer engagement. This was evident in the third quarter of fiscal 2023. Star Rewards program members made up roughly 72% of the overall Macy's brand-owned-plus-licensed sales on a trailing twelve-month basis. On a trailing 12-month basis, 41.3 million active customers shopped the Macy’s brand. We note that 4 million active customers shopped the Bloomingdale’s brand on a trailing 12-month basis. Comparable sales at the Bluemercury brand were up 2.5% on an owned basis. About 683,000 active customers shopped the Bluemercury brand on a trailing 12-month basis.
What Else?
In recent developments, this omnichannel retailer received a buyout proposal from real estate investor Arkhouse Management and asset manager Brigade Capital Management, per the media reports. This deal is valued at $5.8 billion, according to the media sources. Sources say that the offer, which was submitted on Dec 1, 2023, values the company’s shares at $21 a share. We note that the offer price reflects a 32.4% premium to M's closing price of $15.86 per share on Nov 30. However, Macy’s has declined to comment.
According to sources, the group offering the proposal holds a huge stake in Macy's via Arkhouse-managed funds and has also discussed with the company, whose board has been mulling the offer.
Nonetheless, this Zacks Rank #3 (Hold) company seems to be a decent investment pick now. A VGM Score of B further adds to the strength.
Key Picks
We have highlighted three better-ranked stocks, namely Abercrombie & Fitch ANF, Gap GPS and American Eagle Outfitters AEO.
Abercrombie & Fitch, a leading casual apparel retailer, currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Abercrombie & Fitch’s current financial-year sales suggests growth of 13.3% from the year-ago reported figure. ANF delivered an earnings surprise of 713% in the last reported quarter.
Gap, a fashion retailer of apparel and accessories, currently sports a Zacks Rank of 1. The company has a trailing four-quarter earnings surprise of 137.9%, on average.
The Zacks Consensus Estimate for Gap’s current financial-year earnings per share (EPS) suggests growth of 387.5%, from the year-ago reported figure.
American Eagle Outfitters, a retailer of casual apparel, accessories and footwear, currently has a Zacks Rank #2 (Buy). AEO delivered an earnings surprise of 23% in each of the trailing four quarters.
The Zacks Consensus Estimate for American Eagle Outfitters’ current financial-year sales and EPS suggests growth of 4% and 39.2%, respectively, from the year-ago reported figures.
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Free: See Our Top Stock and 4 Runners Up >>Macy's, Inc. (M) : Free Stock Analysis Report
Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
American Eagle Outfitters, Inc. (AEO) : Free Stock Analysis Report
The Gap, Inc. (GPS) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
