What's going on?
Department store chain Macy’s announced strong third-quarter results on Wednesday, boosted by growing sales both in its physical stores and online. Despite this, investors sent its shares down 5% – possibly disappointed that Macy’s didn’t think its Christmas would be even whiter.
What does this mean?
Macy’s has been working hard to improve its business recently – and avoid going the same way as Sears. It’s focused its efforts on tightening up the basics, testing new technology and store concepts, as well as expanding its presence online. That approach is continuing to pay off: total sales grew 2% last quarter, ahead of investors’ expectations, with online sales up by “double digits”.
Not only that, but Macy’s isn’t having to discount its products as much as last year, meaning a better profit margin. The company raised its expectations for the rest of the year, suggesting it’s pretty confident about things as it goes into the all-important holiday season.
Why should I care?
For markets: A strong holiday season to come – for some.
In what could be another sign of incumbents fighting back, Macy’s (Macy’s’s?) heightened excitement for the holiday season contrasts with the likes of Amazon, Apple, and Alibaba – all of which recently lowered their own expectations. All eyes are now on Black Friday next week (mark your diaries), which may offer clues as to who’ll be on Santa’s “naughty” and “nice” lists.
The bigger picture: The US economy is still looking healthy.
Macy’s positivity about the holidays stems not just from its own initiatives but from confidence in the economy, consistent with inflation data out today which showed prices ticking up steadily in October. The US economy is doing pretty well right now, but with consumer spending making up around 70% of it, a few good months of turkey and presents will be important. With employment high and wages growing, that should be a given – but who knows what that pesky trade war could do…