Brighter outlook from Macy's, Kohl's after sales bounce back
New York — A return, at least temporarily, to near normalcy is giving a boost two of America's largest department stores hit hard by the pandemic last year.
Macy's and Kohl's raised their projections for 2021 Thursday after easily beating expectations in the just-ended second quarter. Americans are going back to stores again to buy dresses, luggage and other goods that fell to the bottom of the priority list last year when the pandemic struck.
“We are emerging from the pandemic, a stronger company than we were before it began in the second quarter, ” said Macy's CEO and Chairman Jeff Gennette.
Shares surged 20%.
Major retailers are rolling out quarterly earnings reports this week and next, and the data so far has consistently pointed to a return to almost normal behavior by U.S. shoppers. That means the explosion of online shopping during the pandemic is easing, with more people heading to stores.
Macy's online sales fell 6% compared with last year when they surged 53% in the same time frame last year. Still, online sales were up 45% when compared with the second quarter in 2019, so some changes may be here to stay.
COVID-19 is still everywhere, however, and there are other potential headwinds emerging.
Retailers are now monitoring the spread of the delta variant, which has led to more mask mandates. They’re also grappling with higher prices just as government stimulus and other benefits, which helped energize spending, fade. Snarled supply chains are still snarled and companies can't find workers.
And prepandemic threats for traditional department stores are still there, such as alternative clothing chains like T.J. Maxx and online sellers, too. On Thursday, The Wall Street Journal reported that Amazon plans to open several large physical retail locations in the U.S. similar to department stores. It quoted unnamed sources familiar with the matter.
Former Macy's CEO Terry Lundgren said in a CNBC interview Thursday that he believes physical locations would cut down on the number of returns for Amazon, particularly with clothing, a huge expense.
Amazon would not comment on The Wall Street Journal report.
Macy's reported earnings of $345 million, or $1.08 per share in the three-month period ended July 31. Adjusted earnings were $1.29 per share, far above the 23 cents industry analysts had expected, according to FactSet.
Last year, Macy's lost $431 million in the same period.
Revenue rose nearly 60% to $5.64 billion, better than the $5.01 billion Wall Street projected.
Macy's now expects sales for the year of between $23.5 billion and $23.95 billion, which is better than Wall Street is expecting. Adjusted earnings are expected to be between $3.41 and $3.75 per share, up from $1.71 to $2.12.
Kohl's reported earnings of $382 million, or $2.48, for the three-month period ended July 31, topping analyst expectations of $1.26. Revenue rose 31% to $4.22 billion, also better than expected.
The first group of what will eventually be hundreds of Sephora shops at Kohl's are doing well, said CEO Michelle Gass.
A partnership with Amazon that allows customers to return items at Kohl's locations has also created new customers for the department store, said Gass.
The news of potential brick-and-mortar stores for Amazon would not threaten that partnership, Gass said.
“Both partners continue to be very pleased with our relationship, “ she said. “We see that moving forward into the future. “
Kohl's now expects annual sales to increase in the low-twenties percentage range compared with previous projections of mid-to-high teens. Adjusted earnings per share is projected to be between $5.80 and $6.10.
Shares of Kohl's Corp., based in Menomonee Falls, Wisconsin, rose nearly 8%.