Macy’s, Inc. (NYSE: M) today reported results for the first quarter of 2021 and raised guidance for fiscal 2021.

“In our first quarter we outperformed sales expectations across all three of our brands: Macy’s, Bloomingdale’s and Bluemercury. We built on our momentum from the fourth quarter and our sales trend continued to improve throughout the first quarter,” said Jeff Gennette, chairman and chief executive officer of Macy’s, Inc.

First Quarter Highlights

In addition to prior year comparisons, Macy’s, Inc. is providing comparisons to 2019 to benchmark its performance given the impact of the pandemic last year.

• Diluted earnings per share of $0.32 and Adjusted diluted earnings per share of $0.39 both exceeded expectations for the quarter.
  • This compares to $0.44 of both diluted earnings per share and Adjusted diluted earnings per share in first quarter 2019.
  • Excluding asset sale gains, Adjusted diluted earnings per share for the quarter exceeded first quarter 2019 by $0.04.

• Comparable sales up 62.5% on an owned basis and up 63.9% on an owned plus licensed basis versus 2020.
  • Comparable sales down 10.5% on an owned basis and down 10.0% on an owned plus licensed basis versus 2019.
  • Trend improvement compared to a 17.1% owned plus licensed comparable sales decline in the fourth quarter of 2020.

• Digital sales grew 34% over first quarter 2020 and grew 32% over first quarter 2019.
  • Digital penetration was 37% of net sales, a 6-percentage point decline from first quarter 2020 when stores closed, but a 13-percentage point improvement over first quarter 2019.

• The company saw Platinum, Gold and Silver customers in its Star Rewards Loyalty program re-engage, with the average customer spend up 10% compared to first quarter 2019 and an 11-percentage point trend improvement from fourth quarter 2020.
  • The company’s Bronze segment, its youngest and most diverse loyalty tier continued to grow, adding 1.7 million members.
• The company brought 4.6 million new customers into the Macy’s brand, a 23% increase compared to first quarter 2019.
  • 47% of new customers came through the digital channel in first quarter 2021.
• Gross margin for the quarter was 38.6%, up from 17.1% in first quarter 2020 and up 40 basis points from first quarter 2019.
  • Improvement due to increased merchandise margin was largely driven by inventory productivity and the execution of the Polaris strategy.
  • The first quarter 2020 included an approximately $300 million inventory write-down from markdowns on fashion merchandise due to the store closures during first quarter 2020.
  • Delivery expense declined approximately 20 basis points from the first quarter of 2020 and increased 230 basis points from first quarter 2019, partially due to the higher penetration of digital sales.

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• Inventory was down 23.1% from first quarter 2019.
  • Continued strong inventory management discipline from 2020.
• Selling, general and administrative (“SG&A”) expense of $1.7 billion; increased $150 million from first quarter 2020 and declined $364 million from first quarter 2019.
  • SG&A as a percent of sales was 37.1%, down from 52.9% in first quarter of 2020 and an improvement of 130 basis points from first quarter 2019.
  • Disciplined expense management, Polaris savings and improved productivity contributed to the first quarter SG&A performance.

• Net credit card revenue of $159 million, up $28 million from first quarter 2020 and down $13 million from first quarter 2019.
  • Represented 3.4% of sales, 90 basis points lower than first quarter 2020 and 30 basis points better than first quarter 2019.
• Approximately $1.8 billion in cash as of the end of the first quarter due to strong performance and the more efficient use of capital compared to pre-pandemic.

CWEB Analyst’s have initiated a Buy Rating for Macy’s, Inc. (NYSE: M) and potential of $29 by 2021. Positive cash flow has increased ot $1.8 Billion. Stimulus program and expanding vaccine rollout have contributed to Macy’s bottom line. The second quarter of 2021 will provide indication of improving operations and expansion in the retail sector.