Macy’s (M) soars on earnings as company plans to seperate e-commerce business from brick and mortar business

Macy’s (M) on Thursday reported fiscal third-quarter earnings and sales that topped analysts’ expectations, leading the department store chain to raise its full-year forecast ahead of the holidays.

Macy’s shares jumped more than 20% in early trading on the news, hitting a three-year high of $37.66.

CEO Jeff Gennette said Macy’s added 4.4 million new customers in the quarter and benefited from an “improved economic environment.” He also tried to ease concerns about ongoing supply chain issues and said Macy’s doesn’t expect to be hurt by bare shelves during the critical holiday shopping season.

Separately, the company teased the launch of a new digital marketplace that’s set to launch in the second half of 2022. The announcement comes as activist Jana Partners has taken a stake in the business and is pressuring Macy’s to spin off its e-commerce operations from its stores, hoping to fetch a greater valuation than what Macy’s has today.

Saks Fifth Avenue pursued a similar split earlier this year. Its e-commerce unit is now reportedly preparing for an initial public offering at a higher valuation than it saw after its spin off from Saks’ stores.

Gennette told analysts Thursday that Macy’s has engaged with the consulting firm AlixPartners to review its business.

Here’s how Macy’s did in the three-month period ended Oct. 30 compared with what analysts were anticipating, based on a survey by Refinitiv:

  • Earnings per share: $1.23 adjusted vs. 31 cents expected
  • Revenue: $5.4 billion vs. $5.2 billion expected

Macy’s reported net income of $239 million, or 76 cents per share, compared with a loss of $91 million, or 29 cents a share, a year earlier. Excluding one-time items, the company earned $1.23 per share, better than the 31 cents that analysts had predicted.

Sales grew to $5.4 billion from $3.99 billion a year earlier. That came in ahead of estimates for $5.2 billion.

Macy’s reported comparable sales growth, on an owned plus licensed basis, of 35.6% in the quarter. Analysts had been looking for growth of 29.3%, according to Refinitiv estimates.

Digital sales grew 19% year over year and were up 49% on a two-year basis. The company said its online business made up 33% of total sales, up 10% from 2019 levels. And 41% of Macy’s new customers came through digital in the third quarter.

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