Omnichannel and ecommerce sales are a bright spot for retail chain Macy’s Inc.’s 2019 fiscal year ended Feb. 1, 2020.
Online sales represent about a quarter of Macy’s net sales, with digital sales increasing in the high single digits for its 2019 fiscal fourth quarter ended Feb. 1, and for its 2019 fiscal year.
More Macys.com shoppers selected buy online pick up in store for their fulfillment option during the year, as these orders increased more than 62% in its 2019 fiscal year, Macy’s reported without revealing specific figures.
This is good news for Macy’s, as buy online pick up in store transactions are its most profitable online transaction, chief financial officer Paula Price told investors, according to a SeekingAlpha transcript.
These orders are more profitable because it eliminates the cost of shipping the order to a shopper’s house. Although digital sales contribute to profitability, Price cites “digital delivery expenses” as one of its biggest headwinds, which makes buy online pick up in store all the more important for the retailer. Plus, buy online pick up in store shoppers buy about 25% more, Price said.
“We know that our omnichannel customer is our most engaged and valuable customer,” CEO Jeff Gennette said.
This dovetails with new consumer survey data from a Digital Commerce 360 and Bizrate Insights survey of 1,000 online shoppers in February 2020. Within the last 6 months, 21% of online shoppers say they have made an additional purchase when picking up an online order at a store, and 18% said they plan to do this more often in the next 6 months.
In addition, mobile sales were more than half, at 55%, of its online sales for the quarter and year, with the Macy’s app generating roughly 20% of digital sales, the retailer reported. Plus, overall, mobile sales increased 55% year over year, Macy’s said.
Macy’s also reached 1 million SKUs in its “vendor direct” program, which lets brands drop-ship orders directly to customers who purchase on Macy’s ecommerce site. Sales from vendor direct increased more than 60% year over year in its fiscal 2019, and the program is now more than 13% of Macys.com’s sales.
While Macy’s points to digital as a “key engine of growth” for the future, it needs to address the largest issues at the business, including declining comparable store sales.
Comparable store sales for owned and licenses stores decreased 0.5% in Q4 and 0.7% for the year, Macy’s reported.
“Taken as a whole, 2019 did not play out as we intended for Macy’s Inc. However, we executed well during the holiday 2019 season,” Gennette said.
Macy’s said it had a “solid” holiday season with an uptick in sales in the 10 days leading up to Christmas. However, comparable store sales still fell 0.7% in November and December 2019, compared with the year-ago period.
Earlier this month, Macy’s announced a 3-year plan that will close 125, or roughly a quarter, of its stores and cut about 2,000 jobs.
Macy’s is going to continue to invest in its “growth formula” strategy, which invests $2.5-$2.7 million per store. Half of the investment goes to customer amenities, such as new fixtures, product assortment and an updated customer service area, and the other half goes to sales-getting initiatives. In the first 50 stores that received the investment, it had a bump in sales, plus a bump in digital sales from consumers in the surrounding ZIP codes of those stores, the retailer reported.
“When you look at the omnichannel behavior, you’re getting that amplifying effect, which is great,” Gennette said.
It plans to make these store-growth investments in 250 stores by the end of 2020. At the end of 2019, Macy’s Inc. had a total of 776 stores, with 551 Macy’s stores, 53 Bloomingdale’s stores and 172 Bluemercury stores.
Macy’s is No. 5 in the 2019 Digital Commerce 360 Top 500.
For its fiscal fourth quarter ended Feb. 1, 2020, Macy’s reported:
- Net sales of $8.34 billion in the fiscal fourth quarter ended Feb. 1, 2020, a 1.4% decrease compared with $8.46 billion in the same year-ago period.
- Total transactions decreased 0.5% and items per transaction decreased 1.0% year over year.
- Net income attributable to Macy’s shareholders of $34.0 million, a 95.4% decrease compared with $740.0 million.
For its 2019 fiscal year ended Feb. 1, 2020, Macy’s reported:
- Net sales of $24.56 billion for its 2019 fiscal year ended Feb. 1, 2020, a 1.6% decrease compared with $24.97 billion in the previous year.
- Transactions increased 2.2% and items per transaction decreased 1.6% year over year.
- Net income attributable to Macy’s shareholders of $564.0 million, a 49.2% decrease compared with $1.11 billion.
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