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Here's Why Macy's Stock Soared Today

By Joe Tenebruso – Nov 18, 2021 at 2:53PM

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As shoppers return to its stores in droves, a new online marketplace promises to boost the retailer's online sales.

What happened

Shares of Macy's (M -1.39%) leaped on Thursday after the department store chain posted strong third-quarter financial results and announced a potentially powerful new digital growth driver. 

As of 2:15 p.m. ET, Macy's stock price was up 22%.

So what 

Macy's net sales jumped 36% year over year to $5.4 billion. The retailer's in-store traffic recovered from its pandemic downturn, and its online operations continued to grow at a healthy clip. Companywide comparable sales rose 35.6%, while digital sales increased 19%.

"Consumers continue to spend, and we successfully offered a wide range of expanding merchandise assortment to meet their growing demand," CEO Jeff Gennette said in a press release. 

A person is pointing to a digital chart that rises, then falls, then rises again.

Image source: Getty Images.

Moreover, price increases and a lower reliance on discounts helped Macy's gross margin rise to 41%, up from 35.6% in the third quarter of 2020. The company is also reaping rewards from its cost management initiatives. Macy's selling, general, and administrative expenses as a percentage of revenue improved to 36.3%, down from 43.3% in the year-ago period.

Together, Macy's booming sales and improving margins drove a sharp increase in profits. Its adjusted earnings per share checked in at $1.23, compared to a per-share loss of $0.19 in the prior-year quarter.

Now what

Better still, management now expects Macy's to generate full-year net sales of $24.12 billion to $24.28 billion in 2021, up from a prior projection of $23.55 billion to $23.95 billion. The company also boosted its adjusted earnings per share guidance to $4.57 to $4.76, up from $3.41 to $3.75.

Additionally, Macy's said it would launch a digital marketplace to fuel its growth. The e-commerce platform would help to expand the retailer's product offerings by allowing third-party merchants to sell their wares on Macy's websites. It's slated to go online in the second half of 2022.

"Our digital business is targeted to generate $10 billion in sales by 2023, and we expect the new marketplace platform to produce incremental revenue on top of that target," Macy's executive Matt Baer said.

Joe Tenebruso has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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