Macy's, Inc. (NYSE:M) Q2 2020 Earnings Conference Call - Final Transcript

Sep 02, 2020 • 08:00 am ET

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Macy's, Inc. (NYSE:M) Q2 2020 Earnings Conference Call - Final Transcript

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Presentation
Executive
Jeff Gennette

launched in February. We will then open up the line for your questions.

With that, I'll hand it over to Felicia.

Executive
Felicia Williams

Thank you, Jeff, and good morning, everyone. As Jeff said, the second quarter closed stronger than we anticipated and this strength happened across all three brands; Macy's, Bloomingdale's and Bluemercury.

Overall, we delivered sales of approximately $3.6 billion, a decline of 35.1% on an owned plus licensed comparable basis. We experienced some ups and downs during the quarter. For instance, some aspects of our business recovered more quickly than we originally modeled such as our stores which reopened stronger than anticipated and our digital business remained strong throughout the quarter. Luxury, particularly at Bloomingdale's, also outpaced our expectation. These factors contributed to the outperformance that we saw against our expectation.

On the other hand, in our Star Rewards loyalty program, the foundation of our customer retention, migration and acquisition strategy, year-over-year we saw our members' spend slightly lag our non-loyalty customers in the quarter, but we saw building momentum in August, starting in week one with our Star Money event. So far we've involved a 0.25 million people in the first three weeks of the fall season in our tender-neutral Bronze tier, which is an approximately 40% increase over prior year.

Our stores saw sales decline of 61% in the quarter versus last year. As you know, we began reopening up stores gradually during the first week of the quarter, but almost all stores reopened by the end of June. The trend in store results was closely correlated with the pace of reopening, as performance improved sequentially each month as the quarter progressed and we exited the quarter with July down 40% and we saw this progress despite the month of July being negatively impacted by pockets of COVID flareup in various parts of the country; Florida, Georgia, and Texas among them.

However, in many of those areas, where the resurgence slowed the stores recovery, the digital business helped to partially offset the pressure. And overall, our digital business accelerated its strong performance coming out of the end of the first quarter and grew by 53% in the second quarter. Digital penetration across the company increased to 54%, up approximately 10 percentage points versus the first quarter.

However, with stores improving as the quarter progressed, digital stress moderated at the end of the quarter with July penetration coming in at 42% on digital growth of 25%. We expect this moderation to continue into the fall season as we discussed on our last call.

In some urban markets, including New York City, San Francisco and Chicago, we continue to see these declines in traffic, driven by the slow return of workers to the city center and the erosion in both international and domestic tourism. Thus, as expected, international tourism sales were down significantly in the quarter and the decline impacted our Macy's Inc. crop by about 210 basis point.

Within the Macy's brand, we saw strength in many of the