Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter
Unlike Sears, Macy’s didn’t miss the train on online sales. But it uses its vibrant online business to paper over the decline in its brick-and-mortar business.
When Macy’s reported third-quarter earnings this morning, it made a big deal out of its same-store sales increase, showing a 3.1% year-over-year increase. It was the first line in its report. “Comparable sales,” it calls them wisely, leaving “store” out of the term, as we’ll see in a moment.
Overall net sales rose 2.3% in Q3 compared to the same quarter last year. This rate of growth was just under the rate of consumer price inflation of 2.5%. So it’s not a lot to write home about. As all major retailers, Macy’s divides sales into two categories:
- Sales at its brick-and-mortar stores
- And “digital sales.”
Macy’s doesn’t disclose dollar figures on its brick-and-mortar sales or its digital sales, and it doesn’t even disclose percentages, other than saying that online sales booked a “double-digit” increase.
The company has spent a fortune building up its various online platforms and its order fulfillment infrastructure, including fulfillment centers spread around the country. According to a report from eMarkter in July, in terms of share of US online retail sales, Macy’s is in eighth place.
While it’s far behind the heavyweights Amazon, eBay, Apple, and Walmart, the comparison is not fair because Amazon and eBay sell everything, from diapers to chainsaws. Macy’s various brands are much more specialized. Nevertheless, it’s right in the same ballpark with Home Depot, BestBuy, QVC Group, Costco, and mega-cash-burning online-only furniture-retailer Wayfair:
Share of online retail in the US:
- Amazon [AMZN] 49.1%
- eBay [EBAY]: 6.6%
- Apple [AAPL]: 3.9%
- Walmart [WMT]: 3.7%
- Home Depot [HD]: 1.5%
- BestBuy [BBY] 1.3%
- QVC Group [QVCA]: 1.2%
- Macy’s [M]: 1.2%
- Costco [COST]: 1.2%
- Wayfair [W]: 1.1%
But here is what you should know about its same-store sales:
When Macy’s claimed in the first line of its report, “Comparable sales growth of 3.1% on an owned basis; 3.3% on an owned plus licensed basis,” its “comparable sales,” as it calls them wisely, include all online sales, and thus are inflated by the boom in online sales.
Mall owners and mall creditors thinking that Macy’s won’t close any more anchor stores in future years based on these growing same-store sales, think again. These numbers are not same-store sales; these numbers include all its online sales.
Here is how Macy’s defines that “increase in comparable sales”: “Represents the period-to-period percentage change in net sales from stores in operation throughout the year presented and the immediately preceding year and all online sales.”
With total sales ticking up only 2.3%, and with online sales surging in the double digits, sales generated at its brick-and-mortar stores must have fallen. This is the dirty secret Macy’s is hiding by not giving us the numbers by category. And those who use Macy’s figures to show that the brick-and-mortar meltdown doesn’t exist are willingly drinking the Kool-Aid.