#Macy’s shares surge more than 20 percent on bright holiday outlook

Shares of Macy’s leaped more than 20 percent on Thursday after the retailer raised its financial forecast for the holidays, saying its stores are well stocked with Christmas inventory despite supply-chain kinks that have plagued the industry.

Shoppers, meanwhile, have hit the ground running this holiday season, executives said, snapping up fresh wardrobes as they head back to work and back on the town. Demand for fragrances, jewelry, watches, sleepwear and home goods is likewise surging.

Macy’s stock on Thursday was recently up 22 percent at $37.71. Shares of rival Kohl’s — which also raised its outlook on Thursday, citing brisk customer traffic — were recently up 7.6 percent at $60.88.

Macy’s added 4.4 million new customers in the most recent quarter and got a boost from an “improved economic environment,” Chief Executive Jeff Gennette said. International tourists are returning to the US, boosting business at its New York flagship, even as the company attracts shoppers with new initiatives including a tie-up with Toys R Us, Gennette said.

As for supply-chain bottlenecks that have slammed retailers in recent months, including cargo pile-ups at ports and a dire shortage of truck drivers, Macy’s said it has “implemented several measures to mitigate supply-chain disruptions and does not expect to be materially impacted during the fourth quarter 2021.”

The largest department store company expects full-year sales of $24.12 billion to $24.28 billion, compared with a previous forecast of $23.55 billion to $23.95 billion. Kohl’s said it expects 2021 net sales to increase by a percentage in the mid-20s, compared with a previous forecast of a low-20s increase.

Macy’s also addressed concerns raised by activist investor, Jana Partners, which took a stake in the company in October and is pushing for Macy’s to spin off its digital business, similar to what Saks Fifth Avenue did earlier this year.

The idea is that the e-commerce business is growing more rapidly than bricks-and-mortar stores and a spinoff would unlock the value of Macy’s digital business. 

On an earnings call, Macy’s brass said it is “open to all options that are likely to create long-term shareholder value” and that it has recently engaged AlixPartners to work with its board and financial advisors. It’s “too early to tell what the results of this additional analysis will be, but we plan to update everyone after the work is complete,” the company added.

Barry Rosenstein, managing partner and founder of JANA Partners, said in a statement, “We appreciate Macy’s strong execution in the quarter and commend the board for promptly engaging advisors to undertake a review of ways to unlock the value of its strong eCommerce business.”

Macy’s said its same-store sales, or sales at stores open at least a year, rose 37 percent and digital sales grew by 19 percent in the third quarter ended Oct. 30 compared to a year ago. They rose by 49 percent compared to the same period in 2019, the company said.

The department store also said it will launch a ‘curated’ digital marketplace next year, allowing third-party sellers to sell merchandise on Macys.com and Bloomingdales.com.

“Our digital business is targeted to generate $10 billion in sales by 2023, and we expect the new marketplace platform to produce incremental revenue on top of that target,” Matt Baer, chief digital and customer officer at Macy’s said in a statement.

“The marketplace platform will enable us to expand our assortment at a low incremental cost, while giving Macy’s customers easy access to even more product selection to meet their diverse needs.”