Macy’s blames/credits the weather for its sales performance
Turnabout is fair play, they say. Macy’s, which largely blamed a decrease in sales during the first quarter on the awful weather that gripped much of the country, noted that warmer temperatures beginning in April have led to improved performance for the chain ever since.
The department store chain reported a nine percent increase in profits despite an overall sales decline of 1.7 percent year-over-year for the first quarter. Comparable store sales in locations open for at least a year were down 1.6 percent.
On an earnings call with analysts, Macy’s CFO Karen Hoguet was confident that sales at both Bloomingdale’s and Macy’s would be stronger during the second quarter.
"Some weather driven businesses such as shoes and apparel were weak overall in the quarter, but perform much better in the south than in the north, giving us confidence for the second quarter, now that the weather is finally warmed up," said Ms. Hoguet.
As in the past, Macy’s continues to focus on its M.O.M. (My Macy’s Omnichannel and Magic Selling) strategies. Among the customer groups getting increased attention are Millennials. Ms. Hoguet said the company is making good progress with this customer base.
"When you think about that millennial customer, we tend to focus on the apparel sides of it. But there is a lot going on in shoes, handbags, cosmetics and also home," said Ms. Hoguet. "One of the strengths in our furniture business has been smaller scale furniture which is really appealing to the millennial customer. And we’ve now got strength in kid’s furniture. So there is just a lot going on for that millennial customer throughout the entire store, not just the apparel areas."
Discussion Questions
How much of a factor is the weather when it comes to the sales performance of department stores such as Bloomingdale’s and Macy’s? What is your take on Macy’s first quarter when profits continued to rise even though the company posted a decline in sales?
Weather is always a factor in terrestrial based sales. It may be considered retail’s oldest excuse, but it’s real.
I think the profit improvements are a function of leveraged inventory across channels. Macy’s has been at the “omnichannel game” for quite some time. It proves what we’ve been saying for a while, I think. Successfully managing inventory across channels leads to higher profitability.
The weather is a huge element in 2 ways.
1) The merchandise mix. If the weather changes in a major, unexpected manner then the mix is off (or gone) and the shopper goes elsewhere.
2) The shopper’s attitude and willingness to spend. Weather impacts humans’ mindset around things like shopping. Many shoppers are centered on the store visits and bad weather can alter that in a big way. Attitude for spend is a huge piece here.
I began working with this area back in 1992 when we pulled together a planning system with a weather tracking system. The planning and weather forecast elements together helped many retailers re-think how they might construct a mix. This area today – with mobile, ecomm, etc., is much more advanced. Add in the Millennial shopper’s mind and it gets very complex.
Weather and buying and shopping – bolted at the hip.
Wait! This is a far more nuanced argument!
Weather not only influences sales, now it impacts margins as well.
Seriously, there may be an argument here in terms of which categories move better and/or worse at better and/or worse margins, but you can’t blame or credit the weather for the fundamental financial performance of the business unless you plow snow or run a ski lodge.
I’d be a bit nervous if I saw declines in sales attributed to both good and bad weather.
Grab your umbrella and put down that crib. Feels like there’s a storm coming.
As long as Macy’s continues to generate the vast majority of sales from physical stores, weather will play a factor in its overall results. Giving the argument more credence is the fact that Macy’s has seen an uplift in sales since the weather has improved over the last few weeks.
I attribute the increased profitability to cost-cutting measures and the margin-supporting benefits of its investments in cross-channel inventory management.
Kudos to Macy’s for effectively growing their engagement with the Millennial Generation. Karen Hoguet’s comments to analysts is born out from the Prosper Insights & Analytics April, 2014 survey results.
In that month’s survey, 11.5% of Millennials said they shop Macy’s MOST OFTEN for women’s clothing. That compares to 10.3% in April, 2013, and just 7.6% in April, 2011.
Macy’s and other department stores, discount stores, and specialty stores don’t want to take this generation lightly. When asked which stores they have shopped in the past 90 Days, 22.2% of Millennials visited Macy’s, while 23.7% shopped JC Penney, and 22.6% shopped Kohl’s. Where did the highest percent of Gen Y shop for women’s clothing in the past 90 days? Amazon brought in 24.9% of the generation.
The point has to be addressed, the weather doesn’t stop ALL people from shopping for women’s clothing or other merchandise. Macy’s covers the country — not all areas suffered severe weather in the first quarter. The consumer is still in a fragile spending state — witness the miserly .1% increase in sales during April.
In the Seattle area, weather can play a big part on sales. Severe winter storms will keep people home, especially if there is snow or ice on the streets which this area is ill-prepared to deal with. However, exceptionally sunny weather also keeps people out of the stores, since those days are so few and coveted. Good thing for retailers here that the weather tends to be temperate, albeit cloudy and rainy, most of the year.
On the other hand, Seattleites may be more likely to purchase and download a good book or film while keeping warm by the fire or basking in the sun.
Obviously weather and the ability of communities to cope with severe changes varies across the nation. Undoubtedly, wether has an impact on sales, but it is always subject to change, and sales patterns change with it.
Yes, weather is the oldest excuse in the book for retail financial reports. I read yesterday that Walmart has invoked it too. It’s a real factor, nonetheless – not only causing lost sales, but also delayed trips.
The impact on margins may be greater in apparel categories because those changes in shopper behavior can push some merchandise closer to markdown status. In communities recovering from local weather disasters, spending priorities may shift entirely.
Macy’s is a pretty well-disciplined company at this point, which may account for its good showing on the profit line in Q1. I’d be curious to see if there is a residual impact from weather-related markdowns taken in Q2.
Roger hinted at something that this story made me wonder about. If the (bad) weather decreases sales in B&M stores – presumably because people are staying at home – does it increase online sales (either at those same store’s online sites, or some other online site)? I’m waiting to hear Amazon report sales were up 53.8 % vs. the 51.6% they expected – or whatever the actual numbers are (but I’m not holding my breath).
I just have to add my 2 cents here and not because I’m adding value to this conversation. I have been in retail for close to 40, yes you heard that right, 40 years.
Back in the day, there used to be card set-up that was done routinely before the nightly batch runs. Pretty much every system had cards that had to be punched that would tell the system how and what to run. One of those cards was the weather card.
Each night before the Daily flash could kick off, someone had to call the weather bureau and get the local weather report for each relevant city.
Yes, weather has always been a factor.
With a robust omnichannel strategy, why is weather such a big factor? If consumers are ordering from computers and mobile devices, why would weather be a reason for lower sales?
Profits rising when sales decrease should be coming from some type of increased efficiency.
I am not usually a fan of weather as an excuse for poor business performance. Yes, the conditions make it tougher, but marketers are paid to solve that problem. However, the unprecedented weather conditions this winter, including roads that were completely impassable at times and stores having to be shut down, make sense to me.
If profits increased with a sales decline, it suggests that Macy’s also reduced their discounting during this time period, which might contribute to their performance as well.
First, don’t forget that people say they like to shop at Malls and B&M stores for several reasons, including entertainment and social value. Bad weather, no go shopping.
Kudos to Macy’s for “getting it” when it comes to reaching new potential audiences, like Millennials, providing the right products at the right time at the right place. It’s good to hear that stores like Macy’s have been listening, and are finding fresh ways to get and keep customers.
The uptick in profits against a multiple year market wide slip in sales arrived with the increase in paying attention to the costs of goods sold and managing markdowns. There is much public, employee, and investor outcry about the poor availability and competence of store associates, but the formula is working to the delight of ownership. Likewise the quality of product is continuing to lower consumer enthusiasm and expectations while owning perhaps some of the reason for slower sales. But the increased margins from offshore goods is dampening the continuous sales down quite a bit. Finding ways to survive is the new business as usual. But that’s just my take on this.
Weather was a factor for decreased sales last season – and that wasn’t exclusive to Macy’s and Bloomingdale’s – but affected several other major retailers as well. However, weather wasn’t the only contributing factor; a shorter shopping season also impacted sales figures.
Increase profits are good, but increased sales give investors comfort that the economy is headed in a positive direction, and/or that Macy’s is increasing its performance and ideally taking share away from competitors.