Macy’s shares surge as early moves to stock up for the holidays pay off By Reuters

© Reuters. FILE PHOTO: Shoppers are seen outside Macy’s in the Manhattan borough of New York City, New York, U.S., March 30, 2021. REUTERS/Caitlin Ochs/File Photo

By Uday Sampath Kumar

(Reuters) -Macy’s Inc raised its full-year sales and profit outlook on Thursday, signaling the department store chain had sidestepped supply chain snarls and was well stocked for the all-important holiday season.

The retailer also beat market estimates for quarterly sales and said it was reviewing a potential spin-off of its e-commerce business, sending its shares soaring more than 20% to a three-year high.

After last year’s lockdown-driven slump, department stores have enjoyed a sales rebound in recent months as Americans stepping out more splurge on perfumes, dresses and formal wear.

Rival Kohl’s Corp (NYSE:) also increased its full-year outlook, but was downbeat on its inventory levels due to a shortage in the key category of women’s apparel.

Retailers have faced pressure this year from shipping logjams, shuttered factories in Asia and a scarcity of raw materials, leading companies like Nike Inc (NYSE:) to warn of product shortages during the holiday season.

But Macy’s (NYSE:) moves to expedite shipments and order products earlier in the year helped its inventory levels rise by 19.4% in the third quarter and were expected to ward off a hit from the supply crisis in the holiday period.

“I have the right inventory to do what I need to do in the holiday timeframe,” Macy’s Chief Executive Officer Jeff Gennette told Reuters.

“We use our full muscle to ensure that we have enough inventory for our customers, which does restrict supply to some of our competitors.”

Macy’s expects full-year net sales of $24.12 billion to $24.28 billion, compared with $23.55 billion to $23.95 billion previously.

A 1% rise in its gross margins on pre-pandemic 2019 levels, aided by more full-price selling, also comes as a relief at a time when larger retailers like Walmart (NYSE:) Inc and Target Corp (NYSE:) are struggling with higher supply costs, said Empire Financial Research analyst Berna Barshay.

Kohl’s, meanwhile, has increased spending to speed up shipments and prioritized new products tied to promotional events to prepare for the holiday period.

“We are well-positioned for the holiday season with fresh receipts (shipments) continuing to flow to support anticipated customer demand,” Kohl’s CEO Michelle Gass said.

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