Macy's Inc. (NYSE:M) outlook has been cast into further doubt after the retail outlet reported disappointing third-quarter financial results. A 20% decline in comparable sales underscores the pain the retailer is feeling as the pandemic continues to take a toll on its operations.
Tough Holiday Season
A tough holiday season awaits the retailer as the new wave of COVID-19 cases triggers a new wave of restrictions expected to affect shopping in the often busy holiday season. As the country continues to report over 100,000 daily cases, there are fears that the spiking numbers will keep people away from already distressed retail stores such as Macy’s.
Macy’s has already sounded the warning bells, reiterating it expects comparable sales to fall by low to mid 20% in the holiday season. High Holiday surcharges are also expected to trigger high delivery expenses likely to take a toll on already suppressed margins.
The second wave of coronavirus pandemic poses the biggest risk to Macy’s long-term prospects. For starters, the company is among thousands of retailers considered nonessential, thus subject to potential closures once stringent measures come into play.
Macy’s Long Term Plan
However, the retailer expects investments in fulfillment offerings such as the curbside store, pick-up, and same-day delivery to help shrug off weakness in brick and mortar stores. The company has had to ramp up investments in these three areas in response to customers staying clear of retail stores in fear of contracting the coronavirus.
Likewise, the retailer is also focused on attracting new customers and retaining existing ones. Similarly, it has added a new assortment of exclusive products in response to changes in how customers spend their money. In particular, it remains focused on loungewear, home décor, fine jewelry, and fragrances, seen as areas with tremendous potential when it comes to online sales.
Macy’s net sales fell in Q3 to $3.99 billion from $5.17 billion reported a year earlier. However, it was still above consensus estimates of $3.86 billion. Revenue decline led to a net loss of $60 million compared to net earnings of $231 million reported a year earlier.