Macys 1Q14 Earnings Call Notes

A digest of some of the top insights that I’ve gathered from this week’s earnings calls.  Full notes can be found here.

Things got better at the end of April

” we were pleased both with our earnings in the quarter and also with the momentum change towards the end of April when the weather finally warmed up in the northern part of the county.”

Not sure that everything was weather related, but whatever

“While we aren’t sure that all of the weakness in the quarter was weather-related, we continue to believe that the underlying customer demand is strong enough to enable us to achieve our annual guidance for comp sales of 2.5% to 3%”

Comps negative

“Comp sales were down 1.6% and on an owned plus license basis comp sales were down 0.8% versus last year.”

Weather clearly played a major role

“we were expecting sales to be stronger than they were at both Bloomingdale’s and Macy’s, and as I just stated, the weather clearly played a major role in the weakness.”

The comp is weak in 2Q

“Remember that we had a disappointing second quarter last year and we concluded at that time that our marketing support was insufficient. We then reacted with renewed and strength in promotional strategies in the third quarter.”

We didn’t expect the consumer to be strong, turns out they haven’t been great

“when we gave our guidance at the beginning of the year. We were not expecting the consumer to be all that strong. So that really hasn’t changed with anything we’ve seen in the first quarter. Obviously, could make it a little more challenging but we still think that the consumer is okay but not great.”

You have to keep investing to stay ahead of the curve online

“I don’t know how a retailer could compete going forward without a really strong online presence and investing heavily to keep up with all that’s happening technologically in that world.”

Bloomingdales also did better regionally

“Bloomingdale’s had a tough first quarter as did Macy’s and again did better in their Southern stores and the Northern stores. So that would be the case again”

Weakness in home surprised us because had been so strong for so long

” it stood out for us too because as you know, home has been so strong for so long. So I’m hoping it’s just an outlier and by the second quarter that would no longer be the case. Early May is making us feel a lot better. But there’s really nothing we’re seeing on the competitive front that would lead us to be concerned about home longer term.”

We’ll tell you South doing better than North, but not going to quantify it

“We don’t split it out but the gap — the South has been growing faster than the North, separate from the weather. So that’s — the gap has closed quite a bit but there’s still going to be a gap as there was all last year. But the gap has closed significantly since late April.”

That leads back to the weather discussion…

“as I said, both Bloomingdale’s and Macy’s had tough quarters, if that helps you to get some insights into that and our weakness was across price points and our opening price points were better. So, again, that leads back to the weather discussion that was opposed to the consumer. So, I think until we see the second quarter with the warm-up in weather, it’s going to be hard to really judge the answer to your question.”

Millenials like to shop both online and in store

“There is sort of assumption that many people have that it’s all online, is actually not the case. Millennials love shopping in stores as well as online and browsing in one channel and shopping in another, so both have been doing well.”

Better once warmer

“once the weather warmed up, there was a significant change in the trend. So, again, a couple of weeks doesn’t a quarter or a year make. But it is encouraging to see that and particularly in the northern climate. So that’s part of why we’re feeling confident.”

Key items playing well both online/in store

“home has been where online started first, and so now we’ve been seeing outsized growth in the apparel areas. But again that’s just because of where they started, but our strategies online are actually quite comparable in terms of growth plans to what’s happening in the store. A key item tends to be a key item in both channels and also brands. ”

Trying to change ad budget

“I’m not really the marketing expert, but as you might imagine, we are spending a lot more of our budget on digital and all kinds of ways. Particularly, as you talk about the millennial customer, he or she is getting their information differently than perhaps I am. So there is a lot of change happening. But still much of what we spend is in the traditional media.”

Have a lot of teams working on stuff

” I don’t know the specific answer on the FedEx change, but as you might imagine, we have a team of people doing everything we can to lower delivery expense. So understanding how those changes impact that, I don’t know how, but I guarantee you, we have a team working on it.”

Part of the secret sauce is having the right size/color mix

“part of our secret sauce there is not only finding the right items but it’s assorting them appropriately, size, color, et cetera, store by store, which is the whole My Macy’s strength.”

Apparently there was bad weather over Easter

“as you think about Easter, I would say hard to judge because of weather. But clearly did a lot of business in those categories which tend to go with the holiday.”