Macy's, Inc. (NYSE:M) Q2 2019 Earnings Conference Call - Final Transcript

Aug 14, 2019 • 09:30 am ET

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Macy's, Inc. (NYSE:M) Q2 2019 Earnings Conference Call - Final Transcript

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Executive
Jeff Gennette

platform giving us improved efficiency, speed and scale to support the continued growth of our off-price business. As part of our supply chain strategy, we will roll this Google Cloud platform out to our other distribution centers in 2020 providing additional network flexibility and speed for both Macy's and Bloomingdales.

Third, Vendor Direct. We continue to aggressively grow the SKUs and brands, we're able to offer our customers on macys.com through Vendor Direct. We're now halfway to our goal of adding 1 million SKUs this year. Our customers love the expanded selection. Vendor Direct only has upside. It had sales and gross margin and increases both customer satisfaction and traffic to the site. The zero capital and inventory investment make for a very high ROIC rate.

Mobile. Mobile helps us create a better omnichannel experience for our customers, enabling them to shop more easily and frequently both in our stores and online. Our app is our customers valued assistant for interacting with the Macy's and Bloomingdale's brands, and we continue to see significant increases in usage and conversion. Mobile remains our fastest growing channel and we have a regular cadence of new features with My Wallet, My Store and My Stylist. Many of these will improve the in-store customer experience like quick barcode pickups of online orders, localized product recommendations and in-store rewards that are exclusive to the app.

And lastly, Destination Businesses. Our six Destination Businesses as a group were up 5% for the second quarter with the strongest performance in fine jewelry, men's tailored and women's shoes. The six Destination Businesses account for nearly 40% of our total sales at Macy's and all six are higher AUR businesses. All six continue to outperform the balance of the business on market share, return on investment, and profitability. And we're putting additional resources behind these six categories to drive growth through great product, top performing colleagues, improved environment and enhanced marketing. These destinations are the point of entry to the Macy's brand, and we see significant opportunity to drive cross shopping, which is one of the competitive advantages of being a department store.

While we're pleased with market share growth and these businesses that we've seen to-date, we won't be satisfied until Macy's is taking market share overall and we will get there business-by-business, starting with these six.

So with these initiatives, the team are hard at work at implementing them, and we are confident that they will be important contributors to our back half performance.

Bloomingdale's had a more challenging quarter, driven largely by declines in international tourism. Women's and men's shoes in Bloomingdale's the Outlet were standouts in the quarter and in the third quarter, we're going to be opening two additional outlet stores. Bluemercury had another strong quarter. We've opened 3 new stores for a total of 167 stores across 26 states. Bluemercury freestanding stores and shops within Macy's stores both grew sales in the quarter, with the shop-in-shops showing considerable growth.

Bluemercury.com continues to have significant