Macy’s reports strong fourth-quarter sales and profits exceeding Wall Street estimates despite a number of challenges ranging from supply chain disruptions to labor shortages and inflation.
According to the company, revenue increased by nearly 30% from $6.78 billion in the year-ago quarter to $8.66 billion this quarter.
A $160 million profit, or 50 cents per share, was reported in the year-ago period. Adjusted earnings were $2.45 per share. The company reported a profit of $742 million, or $2.44 per share, for the three months that ended Jan. 29. On $8.46 billion in sales, analysts were expected profits of $2.01 per share.
The sales of stores that have been open at least a year, a key indicator of a retailer’s health, went up by 28.3%. That does not include licensed businesses like cosmetics. Online sales went up by 12% for the quarter.
In addition to rising labor costs, Macy’s is facing increased shipping and transportation costs due to the global supply chain backups that hit companies worldwide during the holidays.
The holiday quarter also brought an additional challenge for stores: a contagious new variant, called omicron, that caused customers to be nervous about shopping.
As a result, workers took sick leave in greater numbers, resulting in increased employee costs for companies after taking on additional workers to fill the gap.
Macy’s announced in November that new and current employees will receive a minimum hourly wage of $15 by May.
A lengthy review led by Macy’s board and assisted by independent financial, legal and third-party advisers, as well as the company’s management team resulted in the company not spinning off its e-commerce business from its stores.
According to the document, key considerations for the board included the high costs of splitting up businesses and the ongoing costs of operating them separately, as well as the high risks for the business and its customers.
After taking the review into account, the company has committed to expanding initiatives in areas such as online, private label, small-format, off-mall Market by Macy’s stores, and Bloomingdale’s stores.
Macy’s made its decision after being pressed by activist shareholder Jana Partners to separate the department stores to improve the evaluation, much like Saks Fifth Avenue did last year. In premarket trading Macy’s shares were up more than 7% on the news.