Macy’s 4Q16 Earnings Call Notes

Karen M. Hoguet – Macy’s, Inc.

Sales down 4%

” Sales were $8.515 billion, down 4% from last year. On an owned plus licensed comp basis, sales were down 2.1%, which was at the low end of our expectations when we started the quarter. Our digital sales continued strong, with double digit growth, while sales transacted in stores continued to be below what we had expected.”

We weren’t able to overcome secular changes

“we were not able to overcome the secular changes in the industry related to shopping habits. These changes appear to have had a bigger impact on our store business than we had expected. We recognize we need to make dramatic changes in how we operate the business. In some cases, we’re already executing our strategies, while other strategies are still in development, most notably our marketing strategy. This includes ideas also for testing how we can simplify our pricing and for improving the store shopping experience.”

Terry J. Lundgren – Macy’s, Inc.

Stepping down as CEO

“Thanks, Karen and good morning, everyone. This is going to be my last earnings call as CEO, as we announced this morning that I’ll be passing that baton to Jeff Gennette next month. And I wanted to join the call to provide my perspective on Macy’s 2016 performance, as well as share a few thoughts of what I’m seeing in the industry as a whole.”

Setbacks seem to happen every 5-7 years

“in my 14 years as CEO at Macy’s Inc. and my six years as CEO of Neiman Marcus before that, I’ve seen a series of setbacks that seem to happen every five to seven years in our industry.”…”now here we are seven years later and after 2008 and 2009 with another setback. And once again, we’re faced with challenges. These are different than before but the message is the same, and that is there’s lots of concern out there about our ability to bounce back, but yet internally, so many of the people that are on our team have seen this movie or some version of it in the past and get excited about taking on that challenge. So we anticipate that the challenging environment that we experienced in 2016 will continue, but we’re not standing still. We made a lot of strategic decisions this past year that are going to set us up well in 2017 and we’re going to continue to fine tune our strategy and vision forward to get ourselves in position to win in the future.”

At some point you’d think everyone would have a new car

“And so at some point in time you’ve got to believe that everybody’s going to have a brand new car, at some point in time. We just had record after record performance of automobile sales. At some point in time, there’s dollars that are going to be freed up for other categories of spending. And when they get to these categories we have to be a major consideration. ”

Have to make a greater effort to convert in store

“And then more and more, we’re convinced that the consumer is entering the store with their mobile device and making their decision where they’re going to shop before they leave their home or their car and making sure that we are able to convert those individuals once they choose to come to our store to make a purchase inside our store, as opposed to a search that might bring them to an alternative site where they believe they can get a similar or a same product for a better value. That can happen. And we have to be stronger, more aggressive on that subject to ensure that we are always very competitive. And that’s where it has to go for us.”

Department stores still serve a purpose

“I’ve said this before, if the department store did not exist today, there’d be a group of smart people sitting in Silicon Valley inventing the department store today, because it will serve a purpose.”

Consumers visiting fewer stores once at the mall

“Two is that the consumer is just more organized today and so since they’ve already done their homework and done their searches for what they want to buy and where they want to buy it from, they are visiting fewer stores once they get to the mall. So I think there’s enough consumers in the mall. It’s just a matter of where they’re choosing to shop based on the searches that they’ve done. And so we have to be top of mind in that search process for them. And our technology team has worked very hard, along with our merchant team to make sure that we match up well.”