Macy's (M) , the over 150-year-old business built by brick and mortar success, is using e-commerce to elevate results moving forward. The focus on the digital driver could help break a recent stock slide that is pushing shares down despite an earnings beat on Wednesday morning. Macy's stock was down 6.9% to $33.22 as of 12 p.m. ET on Wednesday.
In an earnings release this morning, the company noted its success in entering e-commerce in a meaningful way.
"Macy's recipe for success is e-commerce," CEO Jeff Gennette said on an earnings conference call Wednesday morning. "Our e-commerce business just completed another consecutive quarter of double-digit growth, driven by continued improvement to our online offering and experience."
He noted that the company's mobile app in particular is a key driver of success, declaring that the app will be a driver of about $1 billion in sales for the 2018 fiscal year.
The growth in the online business helps put Macy's well ahead of former competitors largely left behind by modernity such as JCPenney (JCP) and Sears (SHLD) . Macy's more than doubles JCPenney's online sales, for example. Sears recently filed for bankruptcy.
Genette noted that he anticipates continued investment in e-commerce initiatives to drive growth, which should help the business continue to accelerate into 2019 as more and more sales move online.
Building on the Brick and Mortar Base
The digital business does carry over to the existing brick and mortar business as well, namely through in-store pickup options. The trend is one that becomes visible in most retailers that have been solid stock picks in recent years such as TJ Maxx (TJX) , Kohl's (KSS) and Target (TGT) .
"The growth of our digital business goes hand-in-hand with the growth of our brick-and-mortar business," Gennette said. "When you look at the economics of online, and you look at a larger portion of the online demand being fulfilled through either 'Buy Online Pickup in Store' (BOPS) or 'Buy Online Ship to Store' (BOSS) and the radiated sales that come from that, that also helps the profitability picture."
The picture of sales online and in-store should be looked at as working together, he explained.
The pick-up in store option drives revenue through convenience minded consumers, which is dominated by millennials, and also adds to foot traffic at the streamlined stores.
In essence, if the mobile and online business for Macy's can continue to grow, the stock should follow suit.
Amazon Impact
That said, there is an elephant in the room in Amazon (AMZN) .
The question remains over whether or not the aggressively forecasted growth in ecommerce will run into an Amazon-shaped wall.
Amazon controls about 50% of U.S. ecommerce retail in 2018, according to eMarketer. The report adds that this may only accelerate as 80% of growth in the ecommerce space is expected to head Amazon's way.
That does not leave a great deal of room for a company like Macy's to continue expanding, especially as Amazon continues to accelerate, sometimes with the help of taxpayers.
With guidance raised, the bar is even higher ahead of the 2018 holidays than it was during last year's strong retail season, the market seems to be reacting a bit tepidly to the competition.
It will certainly be a story to watch, especially as "Cyber Monday" and the holiday season kick off in the coming weeks.
