Macy’s Inc forecast 2021 sales largely above Wall Street estimates on Tuesday with major gains expected in the back half of the year as the retailer bets on its growing online business and the return of customers to its department stores when COVID-19 vaccinations curb the pandemic’s impact.
The upbeat outlook from Macy’s follows better-than-expected results in the holiday quarter as stimulus checks and strong online demand eased the blow from the health crisis.
Retailers are expected to benefit from another wave of stimulus-driven consumer spending in the coming months should the U.S. Congress pass the Biden administration’s support plan that includes sending a $1,400 check to households.
Chief Executive Officer Jeff Gennette said Macy’s expects the first half of 2021 to be “very similar” to the fourth quarter, ended Jan. 30. “The back half, we’ll start to see an improvement in apparel, but remain strong in the categories that have been strong.”
With homebound shoppers reducing purchases of formal work attire and dresses, Macy’s saw casual apparel, home and beauty perform well in the holiday quarter. It added new categories to meet emerging demand, including baby gear, skin care devices, home fragrances, outdoor recreation, and gourmet food.
Macy’s expects sales between $19.75 billion and $20.75 billion for 2021, compared with analysts’ estimates of $20.13 billion, according to IBES data from Refinitiv. Still the company forecast full-year profits below expectations.
Shares in the company, which have risen 29% in the past three months, were volatile Tuesday morning, trading up during a post-earnings call with investors and then slumping as much as 8%. The shares were roughly flat in late morning trading.
CFRA analyst Camilla Yanushevsky called Macy’s a “COVID-19 survivor” but added that in the long term department stores’ “operating models and valuations are simply not sustainable.”
Much of the growth expected in 2021 may be driven by Macy’s digital business. The company now expects annual online sales to reach $10 billion within the next three years.
In the fourth quarter, online sales jumped 21% as the company pushed for faster delivery times with stores being used for fulfillment. That helped reduce inventory levels, and attract new and younger customers.
Still, same-store sales on an owned basis dropped 17% in the fourth quarter, compared with Wall Street estimates of a 16.6% fall, according to IBES data from Refinitiv.
Forced to shutter stores for months and revamp business strategies almost completely, department stores have been among the hardest hit during the pandemic, compared with “essential” retailers such as Walmart and Target.
Macy’s net sales fell about 19% to $6.78 billion in the fourth quarter, but beat estimates of $6.50 billion. Excluding one-time items, its profit was 80 cents per share, above expectations of 12 cents.