Macy’s Inc. surged as much as 17 per cent in early trading after announcing it has reopened 450 stores in some capacity and expects to exit the second quarter with a “clean inventory position.” This shows the U.S. department store chain may be bouncing back faster than expected from the Covid-19 outbreak that upended the retail world this year.

As expected, the company posted a steep revenue decline, with net sales plunging 45 per cent to US$3 billion in the quarter ended May 2 amid U.S. lockdown measures that shuttered the company’s stores. Excluding some items, the company’s net loss was US$630 million.

Key Insights

Macy’s inventory outlook means it won’t exit the lockdown burdened with difficult-to-sell merchandise. Investors have been concerned about the rising level of goods sitting in the hundreds of retail stores that closed in mid-March in an effort to stem the spread of the coronavirus outbreak. For Macy’s, having less seasonal inventory would be beneficial to setting it up for the important holiday season.

Chief Executive Officer Jeff Gennette said reopened stores are performing better than anticipated, while “strong digital business sales trend continued throughout May.” Gennette and the company’s interim chief financial officer, Felicia Williams, will speak during a retail event today at 11 a.m.

Macy’s also used it inventories to help boost liquidity. The department store chain on Monday announced a credit line of US$3.15 billion backed by its inventory, which brought its total new financing to US$4.5 billion. The company said because of these new financings it expects “sufficient liquidity to address the needs of the business.”

Market Reaction

Macy’s shares surged as much as 17 per cent in early trading in New York.