Macy's, Inc. (NYSE:M) Q3 2019 Earnings Conference Call - Final Transcript

Nov 21, 2019 • 08:00 am ET


Macy's, Inc. (NYSE:M) Q3 2019 Earnings Conference Call - Final Transcript


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Jeff Gennette

weather. Given Macy's status as a destination for cold weather apparel, we saw an impact in both cold weather merchandise and in the same trip purchases that our customers typically append. Now that the cold weather has arrived, we're beginning to see those sales flow through.

We also experienced a temporary impact on e-commerce business due in part to the work on the site in preparation for the fourth quarter. The team has completed that work, the site is updated, and our customers can expect an improved experience this holiday season.

Based primarily on the impact of our third quarter sales trend, we are lowering our annual sales guidance to down 1% to down 1.5% and adjusted EPS guidance to $2.57 to $2.77. On the call this morning, Paula will take you through the third quarter results and provide additional detail on our outlook for the year. After Paula's comments, I will take you through our holiday plans and give you a preview of what to expect from our Investor Day in February. Hal Lawton, President of Macy's is also on the call today and will join me and Paula for the question-and-answer session.

So I'm now going to turn the call over to Paula.

Paula A. Price

Thank you, Jeff. Good morning, everyone. So let's jump right in. Sales in the quarter were $5.2 billion, a decline of 3.5% on an owned plus licensed comparable basis. Jeff explained the key drivers behind this performance in his remarks, but while sales overall were disappointing, our 2019 strategic initiatives continued to deliver the results that bode well for our future performance.

During the quarter, we continued to make progress on each initiative. Within the Growth 150 stores, we completed the work on the additional 100 stores. The Growth stores continue to outperform the rest of our store fleet, both validating our investments in this initiative and giving us great confidence in our outlook for this important segment of our store fleet.

We achieved our full year goal of expanding Backstage to another 50 stores. We exceeded our Backstage expectations in the quarter and Backstage locations open for more than a year continued to perform well, up mid-single digits, and have improved both margin and turn. Backstage continues to add recognizable brands that our customers expect in the off-price arena. This is offered through a lens for fashion and value, and our customers are responding. The strength of our Backstage business is in ready-to-wear, which is performing across all segments from sportswear in missy, contemporary and juniors as well as in active and intimate apparel.

The kids category has also been a standout where our Backstage customer is responding to a mix of brand and classifications in apparel as well as toys. We have seen strong improvement in the Backstage shoe business, which is always a major draw for our customers.

Turning to categories across the broader business, we had strong performance in mattresses, fine jewelry, fragrances, dresses, men's active and men's tailor. The weaker