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Macy's CEO says stores are important for the business even though they will shrink

Macy's CEO Jeff Gennette used earnings for Wednesday morning to emphasize the importance of bricks, even when digital sales grow…

Macy’s CEO Jeff Gennette used earnings for Wednesday morning to emphasize the importance of bricks, even when digital sales grow and the company tests a smaller format.

Review discussed the company’s ongoing strategy and says that “The success of success is e-commerce, healthy stores and a great mobile experience that binds all together”, according to a FactSet transcript of the call.

E-commerce experienced double-digit growth, with buy-online pickup-in-store (BOPS) and buy-online ship-to-store (BOSS) growing over the business fleet, Gennette said. BOSS “is very popular” and becomes “greater than expected usage”.

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Macy’s

M, -7.1

9%

reported third quarter adjusted earnings of 27 cents per share, before the 15-cent FactSet consensus. And revenues amounted to 5.40 billion dollars, according to the FactSet guidance. Sales of the same store on owners plus license increased by 3.3%, even before the FactSet consensus for 2.6% growth.

Still, the shares are almost 7% on Wednesday.

The Wall Street Journal published a story on Monday where Gennette said the warehouse dealer plans to reduce the size of the sales floor in underperforming places, reduce staff and reduce goods.

These neighborhood stores can be as much as a fifth less. A test is now underway. There are also plans to rebuild 350 stores.

“The growth of our digital business goes hand in hand with the growth of our bricks,” said Gennette on Wednesday’s talks. “We have seen trend trends in our stores that began a year ago and we have had a stable quarter in the quarter throughout the year. This is important because [a] healthy bricks are part of our strategy to build up lifetime value with our existing customers and getting new customers to the brand. “

See: See Only: Resellers Could Miss Consumers Ready To Spend This High Season

So far, the cover shows some results, wrote Neil Saunders, GlobalData Retails CEO. And the 50 stores that have already been rebuilt are improved. But there is still more to be done.

“We are aware that Macy has a long tail of underinvested properties, many of which are underperforming and do not reflect the company’s latest thinking,” Saunders said, saying that some could benefit from adding the additional price Backstage concept.

“But we also believe that more crucial measures are needed in the medium term, including shrinking floor space and potential shutdowns where the return on investment is not feasible.”

In an October 18 report, Moody said the department stores use technology to offer more convenience to customers and move away from the old-fashioned way they once did business. Things like free delivery, loyalty programs, easy payments and mobile apps make department stores more attractive. Macy has included many of these features in their upgraded locations.

“Bottom line, the adjustment has been expensive, which means it takes time for most to work through the double costs they bear when they wait for their investments to scale,” reports said.

At the same time, Moody considers Macy’s ready for the year’s big shopping period.

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“Macy continued to add solid comparable sales up 3.3% with double-digit e-commerce growth and improve product margins when it continues to invest in its business, “said Moody’s vice president Christina Boni in a Wednesday comment. “A healthy consumer environment and additional investments to meet customer needs have placed Macy’s well for the coming high season.”

Macy’s shares have increased 32.5% for the year so far while Amplify Online Retail ETF

IBUY, -0.52%

is 7.4% for the period, SPDR S & P Retail ETF

XRT, -1.47%

is up 5.1% and the S & P 500 index

SPX, -0.76%

is 0.7%.

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