Macys 1Q15 Earnings Call Notes

Disappointed but not discouraged

“our sales performance fell short of what we had expected. And as a result, so did our earnings. In speaking to our leadership group last week, Terry, our CEO, started his comments by saying, “I am disappointed but not discouraged.” I think that sums up how we all feel. And given the confidence we have in our strategies and the fact that most of the factors contributing to our weaker sales are already behind us or will be shortly, we are still comfortable with our guidance for the full year.”

International tourism impacted sales by a full percentage point

“As we look at the key factors negatively impacting our sales in the quarter, we would highlight the following five. First, international tourism. With the strong dollar, our sales from international tourists are down significantly. Because of our strong flagship stores in key tourist markets like Manhattan, Las Vegas, San Francisco, and Chicago, this has had a big impact on our overall sales. We estimate that roughly 5% of our annual sales come from the international tourists, and our sales from these tourists were down double-digits in the quarter. We estimate that this negatively impacted our comp growth in the first quarter by about one full percentage point. And unfortunately, this impact will likely stay with us at least through the summer vacation period.”

Getting up the reorg learning curve

“The second factor I would highlight is what we call the learning curve….

Ports issue #3

“The third factor is the slowdown in the West Coast ports. This disruption in our receipt flow impacted sales throughout the quarter…From a sales perspective, this should be behind us.”

Issue #4 growth in general merchandise sales was slow

“The fourth factor is growth in general merchandise, apparel and furniture, GAF sales, as we call it, which are our lines of business, was slower than we had expected during the quarter.”

Issue #5 is weather

“The fifth factor, which we’ve all talked about, would be weather.”

Headwinds behind us

“I think if you think about the first quarter, the weather is, obviously, better and the port slowdown will be behind us. The hope is that the disruption from the new omnichannel restructure is lessening as we get into the second quarter. What will continue with us is likely the impact of the strong dollar on the international tourists. Hopefully, as we get through fall that will begin to improve.”

Saw a jewelry/watch slowdown

“Obviously, I called out the fashion jewelry and watch business being slow, and that’s a part of Center Core. We were up against some major handbag promotions in the first quarter, so it’s kind of hard to read until we get through that, what’s happening there. But that growth continues to be very strong, absent the impact of that promotion. Shoes has done well, beauty is doing quite well, fragrances, in particular, is very strong. So hopefully there’s no major change in Center Core as the total. And, again, we’re looking for ways of offsetting that jewelry/watch slowdown. That would be the only call out.”

Pockets of higher inventory

” obviously, there are pockets where inventory is higher than others based on the port situation and also based on weakness in sales. And so, we have plans to make sure that we enter the third quarter fresh and we don’t take forward any of this inventory.”