The coronavirus pandemic has casted a pall over brick-and-mortar traffic turn up, as witnessed by several retail players. Amid such challenging times, consumers’ inclination toward online shopping is a major respite for retail sector participants. Macy’s, Inc. M is no exception to such ongoing trends. While the company’s stores sales has been gravely impacted by pandemic-led disruptions, matters on its digital front are quite encouraging. Let’s take a closer look.
Prudent Efforts to Boost Digital Offerings
Macy’s investments in its digital platform have been yielding. During the second quarter, digital sales surged 53% from the year-ago quarter’s figure and contributed 54% to total-owned comparable sales. The company plans to continue investing in its digital platform, especially in terms of capacity expansion.
In recent actions, the company collaborated with Swedish buy-now, pay-later group Klarna that enables offering online shoppers financial ease and payment flexibility. This new solution helps shoppers make payments in four equal and interest-free installments at the online checkout. Per media reports, Macy’s and Klarna inked a five-year partnership deal with the former becoming one of the first department-store companies to provide the latter’s buy-now, pay-later service. We expect Macy’s online sales to get a solid boost from the launch of this payment solution on macys.com.
Moreover, Macy’s tie-up with DoorDash for expediting delivery service is likely to yield. This collaboration will enable the retailer to offer on-demand and same-day delivery service at roughly 500 Macy’s stores throughout the nation. The company has also been working toward enhancing shipping options and curbside-pickup facility. These apart, Macy’s has a lot more to offer for its online consumers in the form of Macy’s Star Rewards, Macy’s Gift Cards, experts’ help and other options.
Store Sales Look Gloomy
The coronavirus outbreak has significantly hindered Macy’s business activities. During second-quarter fiscal 2020, store sales declined 61% year on year. Management highlighted that although it had begun the process of gradual store reopening in the first week of the quarter, it could only reopen all stores by the end of June. In July, the company witnessed pockets of COVID-19 resurgence in regions like Florida, Georgia and Texas among others. As a result, the company exited the quarter with store sales down as much as 40% in July.
Additionally, comparable sales during the second quarter fell 34.7% on an owned basis and down 35.1% on an owned plus licensed basis. The company’s top line declined 35.8% on a year-over-year basis.
While the company is hopeful about its reopened stores, it is cautious about the increasing number of coronavirus cases that may derail recovery in the back-half of the year. Management highlighted that store sales recovery is likely to remain slow, especially in urban areas. Additionally, the company is assuming that international tourism sales will remain soft for remainder of the year.
We note that shares of the company have declined 7.8% in the past three months against the industry’s rise of 7.2%.
While store sales is yet to pick up pace, Macy’s well-chalked strategic initiatives to boost digital offerings is worth applauding. These actions are likely to help deliver a seamless online shopping experience for the company’s customers this holiday season. Apart from bolstering e-commerce, the company has also been engaged toward optimizing store portfolio and reducing costs. We expect such efforts to continue supporting this Zacks Rank #3 (Hold) company in the forthcoming periods.
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