Department store chains Macy's Inc (M.N) and Saks Inc SKS.N on Tuesday both reported better-than-expected holiday season results and forecast further sales gains this year, banking on investments in technology and e-commerce to pay off.
Macy's has poured a lot of money into updating its inventory management systems in recent years. That allowed it for the first time during the last holiday season to integrate nearly 300 of its stores to help fill online orders, speed delivery and reduce the amount of merchandise that ended up in the clearance bin.
Macy's Chief Financial Officer Karen Hoguet told Wall Street analysts she expects 500 stores to be integrated by the fall and said that could eventually lead to same-day delivery.
That online coordination helped Macy's, which also operates the Bloomingdale's chain, report a better-than-expected profit. Macy's also said it expects the so-called "omni-channel" approach of blending stores and e-commerce to help it reach a 3.5 percent rise in same-store sales for the fiscal year that began this month.
"If you're going to compete with the Amazons of the world, you have to have a strong internet offering - Macy's is definitely a step ahead," said Edward Jones analyst Brian Yarbrough.
Saks Inc SKS.N, trying to catch up to Macy's and Nordstrom Inc (JWN.N), plans to begin using its stores to help fill online orders this year on the way to achieving what it expects to be a 3 percent to 5 percent jump in same-store sales.
Saks is about halfway through a three-year $100 million project to update its inventory management, and Chief Executive Steve Sadove cautioned Wall Street that such investments would pinch profits but were needed to keep pace with competitors and customers.
"There's no question in my mind that omni-channel is the future of where retail is, that there is a brick-and-mortar play and a dot-com play," Sadove told analysts on a conference call.
Lazard Capital Markets analyst Jennifer Davis agreed, and said in a note that Saks' efforts would pay off.
Last year, Saks' investments included a new robotic e-commerce order fulfillment center in Tennessee.
Still, Sadove warned of a "somewhat volatile" 2013 for the luxury sector as higher tax rates on more affluent shoppers take effect.
Saks' shares were flat in afternoon trading, while Macy's shares were up 2.5 percent.
HAPPY HOLIDAYS BUT HIGHER TAXES A WORRY
Saks reported revenue rose 5.5 percent to $976.6 million for the three months that ended February 2. Same-store sales rose 0.7 percent, better than the 0.3 percent decline Wall Street was projecting.
Saks has closed 10 department stores since 2010 and is looking to shut a few more. It currently operates 43, in addition to its lower-priced Saks Off Fifth chain.
Saks' fourth-quarter results were affected by Hurricane Sandy, which disrupted many consumers' lives in November. Saks gets about 20 percent of sales from its Manhattan flagship store and has many locations in the U.S. Northeast, leaving it more exposed to the storm's disruption than some rivals.
Neiman Marcus Group Inc reported that its comparable sales rose 5.3 percent during the quarter. Last week, Nordstrom reported a 6.3 percent rise. Both chains have less exposure to the Northeast.
Saks earned $20.4 million, or 13 cents per share, for the quarter that ended February 2, versus a year-earlier profit of $40 million, or 21 cents per share.
Excluding store closing expenses, asset impairment charges and other items, Saks had a profit of 17 cents per share. Wall Street analysts were expecting 15 cents, according to Thomson Reuters I/B/E/S.
Macy's reported net income of $730 million, or $1.83 per share for the quarter that ended February 2, helped by sales in January that CFO Hoguet told analysts were strong enough to help it overcome a slow start to the quarter.
Excluding pretax expenses, Macy's earned $2.05 a share, while analysts, on average, were expecting $1.99 a share.
Macy's said it expected same-store sales to rise about 3.5 percent during the year and forecast earnings of $3.90 to $3.95 a share, compared with an average Wall Street estimate of $3.81, according to Thomson Reuters I/B/E/S.
(Additional reporting by Nivedita Bhattacharjee and Brad Dorfman in Chicago.; Editing by Maureen Bavdek, Gerald E. McCormick and Dan Grebler)