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Macy’s beats earnings estimates, as turnaround plan shows early progress

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The Macy’s flagship store in the Herald Square neighborhood of New York, US, on Saturday, Feb. 24, 2024. 
Yuki Iwamura | Bloomberg | Getty Images

Macy’s fiscal first-quarter earnings topped Wall Street’s expectations on Tuesday, as the retailer said it saw early signs of momentum in its turnaround strategy.

Even so, the department store operator’s quarterly revenue came in just shy of expectations. Macy’s net sales were roughly 3% lower than a year ago, as its namesake website and store continued to be the weakest part of the business.

Macy’s raised its full-year earnings expectations to reflect the first-quarter beat, along with the low end of its sales outlook. But the retailer said in a news release that it “assumes customers will continue to be discerning in their discretionary purchases.”

Macy’s is getting smaller as it tries to grow sales again. The department store operator, which includes Bloomingdale’s and beauty chain Bluemercury, said earlier this year that it would close about 150 of its namesake stores. That’s more than a quarter of namesake Macy’s locations. It had already announced five store closures and more than 2,300 layoffs in January.

Yet the retailer said it will invest in parts of the business that have fared better, including the roughly 350 Macy’s stores that will stay open. It plans to open more Bloomingdale’s and Bluemercury locations, and smaller Macy’s stores in suburban strip malls.

So far, Macy’s has focused on 50 namesake stores. For example, those locations have had a sharper presentation of merchandise and more employees on the sales floor to help shoppers.

In a news release, CEO Tony Spring said those first 50 Macy’s put up the strongest performance of its namesake stores in the quarter – a potentially promising indicator. 

“Although early days, our investments in product, presentation and experience are gaining traction and reinforce our belief that longer-term, Macy’s, Inc. can return to sustainable, profitable growth,” he said.

Here’s what Macy’s reported for the three-month period that ended May 4 compared with what Wall Street expected, based on a survey of analysts by LSEG:

  • Earnings per share: 27 cents adjusted vs. 15 cents expected
  • Revenue: $4.85 billion adjusted vs $4.86 billion expected

Macy’s first-quarter net income tumbled 60% to $62 million, or 22 cents per share, compared with $155 million, or 56 cents per share, in the year-ago quarter. 

Net sales fell from $4.98 billion in the year-ago period.

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Macy’s now anticipates net sales of between $22.3 billion and $22.9 billion, which would still represent a drop from $23.09 billion in 2023. It expects comparable sales, which take out the impact of store openings and closures, to range from a decline of about 1% to a gain of 1.5% on an owned-plus-licensed basis and including third-party marketplace sales. It had previously expected comparable sales to decline as much as 1.5%.

It expects adjusted earnings per share of between $2.55 and $2.90, raising its previous outlook of between $2.45 and $2.85.

In the company’s news release, Macy’s said the updated outlook reflects both its first-quarter results and an evolving economic backdrop. It said it “continues to view 2024 as a transition and investment year.”

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In the first quarter, Bloomingdale’s and Bluemercury continued to fare better than the company’s namesake brand. At Bluemercury, comparable sales, a metric that takes out the impact of store openings and closures, rose 4.3%. At Bloomingdale’s, comparable sales increased 0.3% on an owned-plus-licensed basis, including third-party marketplace sales. 

At Macy’s, comparable sales declined 0.4% on an owned-plus-licensed basis, including the third-party marketplace.

The company said the 150 underperforming Macy’s stores – which will close by early 2027 – dragged down the results.

At the approximately 350 Macy’s stores that will stay open, comparable sales were up 0.1% on an owned-plus-licensed basis. At the first 50 of those stores to get additional investment, comparable sales were even better: up 3.4% on an owned-plus-licensed basis.

Along with taking a hard look at its store footprint, Macy’s has tried to attract more customers, including more Millennial and Gen Z shoppers, by launching new exclusive brands and overhauling its existing ones.

Macy’s has contended with another challenge: a takeover bid by an activist investor. Arkhouse Management and Brigade Capital have made a bid to buy Macy’s and take the company private. Arkhouse also waged a proxy fight, but settled the fight in April when Macy’s agreed to add two new board members.

Shares of Macy’s closed Monday at $19.10, bringing the company’s market value to $5.26 billion. As of Monday’s close, the company’s stock has fallen about 5% so far this year, lagging behind the S&P 500’s approximately 11% gains during the same period.

This is breaking news. Please check back for updates.

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