It was a difficult fiscal first quarter for Macy’s from a customer engagement standpoint. Macy’s officials blame much of that poor performance to reduced spending by international tourists.
“We continued to be negatively impacted by reduced spending by international tourists,” Macy’s CFO Karen Hoguet said during Wednesday’s earnings call, according to Seeking Alpha. “Sales on international tourist credit cards were down 20% in the quarter on top of a 21% drop last year in the first quarter. This reduction in spending impacted our comp by a little less than a point versus last year. This was disappointing and had a disproportionately negative impact on our center core businesses given what these visitors buy. Given that our stores are concentrated in major tourist markets, this is a big factor for us and we are no longer confident that it will improve anytime soon. While we are focusing on increasing our share of the domestic tourist business, we don’t think we can offset all of the loss on the international side.”
Hoguet noted the company’s strongest performances came from markets across the country that are less dependent on international tourism, but are also smaller, such as North Carolina, Southern Virginia, Columbus, Ohio, Oregon, and the six New England states.
First-quarter sales dropped 7.4%, to $5.771 billion.
“While the quarter started stronger, the business weakened considerably versus our expectations beginning in mid-March and that trend continued through April,” Hoguet said.
AUR (average unit retail) was up slightly and units per transaction was up approximately 1%.
“Digital sales continued strong, still growing double digits, but it too grew less rapidly than anticipated,” Hoguet said. “Bloomingdale’s trends were also weak due to the same trends impacting Macy’s. One major success in the quarter was the rollout of Last Act, our centralized clearance areas for most of women’s and men’s apparel within the Macy’s stores. Merchandise in these parts of our stores are marked with a clearance price and they are not eligible for additional discounts nor coupons. Sales of these goods were up high single digits, driven entirely by the higher average unit retail.”
What’s more, Hoguet noted the performance of Backstage, Macy’s off-price concept.
“We are particularly pleased with how our first two Backstage in-stores opened, one in Nanuet, N.Y. and the other in Waterbury, CT,” she said. “We are hoping these stores bring in new customers as well as add share of wallet of existing customers. So far, both objectives are being reached, but it is premature to claim success. We just opened four more and we expect to open approximately nine more this year. If this strategy works, we could roll it out to approximately 250 to 300 of our Macy’s stores.”