Macys 4Q14 Earnings Call Notes

Each week I read dozens of transcripts from earnings calls and presentations as part of my investment process. Below are some of the most important quotes about the economy and industry trends from the transcripts that I read this week. Full notes can be found here.

1.8% sales growth, 2.5% comp

“Our fourth quarter sales were $9.364 billion, up 1.8% over last year. As we announced on February 3, our sales increased 2.5% on a comp own-plus-license basis in the quarter.”

Tourist stores hurt by strong dollar

“Our tourist stores for both Macy’s and Bloomingdale were heard in the quarter driven by weaker international tourist spending in light of the stronger dollar. ”

Gross margin decline on omnichannel delivery expense

“Gross margin in the fourth quarter was 40.3%, down 30 basis points from last year. Merchandise margin was down by approximately the same amount. The growth in delivery expense due to the Omni transaction was offset by the increase in income from the license businesses and other miscellaneous factors.”

Focused on accelerating growth

“as we look forward we are focused on accelerating growth. The changes made to our organization in January and in early February were made with this in mind. We reorganized our merchant and marketing organizations to make them faster, more nimble and better connected between the stores and the digital world. While we now have Omni buyers and planners who span both channels, we also have digital merchants who are 100% dedicated to working with the Omni merchants to drive digital growth. Just to be clear, we did not eliminate .com merchants at Macy’s.”

Wage rates are something we’re looking at

“obviously wage rates are subject we studied quite closely, and currently our wage rates are above the state minimum wages, and we tend to provide first jobs for many of our associates and we move these entry level associates up the wage scale as they gain experience. Having said that, we’re constantly studying what’s happening and, by the way, its market-by-market and what we need to do to be competitive in terms of our hiring. So I think this will be an ongoing area of attention.”

Weather obviously hasn’t been helpful in February

“e don’t comment on the month, I mean, obviously the weather has not been helpful, but hopefully it will be fine by the time we get through the quarter.”

Having inventory close to the customer is an advantage

“I think you are right about the same day deliver particularly in the bigger markets like Manhattan and San Francisco that’s where you are going to see that, but I do think people want to receive their orders quicker and, frankly, that’s where our store network is been so helpful. If you need something day and you are in a market it doesn’t have same day deliver yet the online pick-up and store helps with that or even next day. And by having inventory closer to the customer that’s a huge competitive advantage for us in terms of satisfying what the customers are looking for.’

Store fulfillment is an important part of strategy

“as I said a little while ago its obviously very important to us to be full filling from stores because we can get gods to the customer a lot faster that way and also we don’t have to build as many mega centers. Now there is obviously a lot of analysis and complicated algorithms to decide the right way of shipping what from what place but store fulfillment is a very important part of our equation going forward and we’ll continue to grow aggressively.”