After a devastating year in 2020 attributed to the coronavirus pandemic, Macy's (NYSE:M) is having an excellent year in 2021. The retailer reported fiscal third-quarter earnings before the market opened on Nov. 18 that delighted shareholders.
The stock surged 21% on the day of the announcement. Macy's is bouncing back aggressively as economies reopen and more people are vaccinated. The return of in-person shopping is not significantly taking away from digital sales, and the positive signs led management to raise the outlook for the rest of the year.
Macy's is attracting millions of new customers
Sales for Macy's third quarter ended on Oct. 30 came in at $5.4 billion. That's 35% higher than the $4 billion in sales it generated in the same quarter last year. But, more importantly, that's 3.8% higher than the $5.2 billion in sales it reported in the same quarter in 2019. It's impressing the market that Macy's achieved higher sales than in 2019 even though the pandemic is far from over.
Macy's attracted 4.4 million new shoppers in Q3. CEO Jeff Gennette talked about what's bringing customers to the brand in the conference call that followed the earnings release:
The growth of our omnichannel ecosystem is powered by our thriving online business, relevant full-line brick-and-mortar stores and growing of off-mall format stores, all soon to be further accelerated by the new digital marketplace platform. Our data validates that in markets where we have a physical presence, our online business is stronger. The interplay between our digital and physical assets is more important than ever, and we are focused on establishing an appropriate footprint in markets that drive our sustainable and profitable omnichannel growth.
Indeed, digital sales in Q3 were three times higher in markets with a physical presence than markets without. That's understandable. Consumers could feel better about buying from a company that has a store nearby. That way, if they need to make a return or an exchange, they can visit the closest store. That reduces hesitation from buyers who worry that a shirt may not fit well or the color is not what they expected.
Macy's raises revenue and earnings-per-share outlook
The better-than-expected results in Q3 led management to raise financial targets for the rest of the year. The company now expects revenue of $24.2 billion, up from the previous estimate of $23.75 billion, both at midpoints. Furthermore, Macy's is now projecting it will deliver earnings per share of $4.67, up from the previous guidance of $3.58, again both at the midpoint.
Management can be commended for leading with skill during the extreme challenges of the pandemic. The decisions it made have strengthened Macy's arguably more than before the outbreak. The market certainly likes what it's seeing from Macy's, and the stock price is up 232% this year.