Macy’s on Wednesday cut its full-year sales forecast because the department store operator said it was combating selective shoppers and increased promotions.
The retailer had a mixed quarter, beating Wall Street’s earnings expectations but missing estimates on revenue.
Macy’s now expects net sales to be between $22.1 billion and $22.4 billion, below the previously expected range of $22.3 billion to $22.9 billion. This would even be down from the $23.09 billion the corporate had reported for fiscal 2023.
Macy’s expects comparable sales, which exclude the impact of store openings and closings, to range from a decline of about 2% to a decline of about 0.5%. The company had previously expected a decline of about 1% to a rise of 1.5%. This metric includes owned and licensed sales, which include merchandise Macy’s owns and items from brands that pay for space in its stores, in addition to Macy’s online marketplace.
The department store operator said in a press release that the brand new forecast range “provides the flexibility needed to address the ongoing uncertainty in the non-cyclical consumer goods market.”
In an interview with CNBC, CEO Tony Spring said customers aren’t spending so freely at any of Macy’s brands – even on the higher-end department store Bloomingdale’s.
“We’re seeing there’s definitely a slowdown, a caution and a delay in the purchase shift,” he said. “And people are responding to the things they want, the things that are high-priced, the new, but even the affluent consumer isn’t spending as much as they were a year ago.”
He said there’s “a lot of noise out there” distracting customers or stopping them from spending money, including higher rates of interest, volatile weather and a busy news cycle.
Here’s what Macy’s reported for its second fiscal quarter and what Wall Street expected based on an analyst survey conducted by LSEG:
- Earnings per share: 53 cents adjusted in comparison with 30 cents expected
- Revenue: $4.94 billion in comparison with expected $5.12 billion
The company’s shares fell greater than 9% in premarket trading.
The iconic department store is striving to get back on more stable feet and achieve sustainable growth. Spring announced in February that the retailer would close about 150 – or nearly a 3rd – of its namesake stores and put money into the remaining 350 or so locations. The plan is to shut the locations by early 2027.
In addition, the corporate is opening latest, smaller Macy’s stores in suburban shopping centers and expanding its locations for the more successful Bloomingdale’s and Bluemercury brands.
But Macy’s results last quarter showed the corporate is struggling to make that comeback at a time when consumers are more selective about what they buy – especially for items which are wants reasonably than needs.
Net sales fell from $5.13 billion in the identical period last yr.
The company’s namesake brand Macy’s continued to be the corporate’s weakest performer, with comparable sales declining 3.6 percent on a owned and licensed basis, including the third-party marketplace.
At Bloomingdale’s, comparable sales based on owned and licensed brands, including the third-party marketplace, fell 1.4 percent. And at Bluemercury, comparable sales increased 2 percent, marking the 14th consecutive quarter of comparable sales growth for the wonder brand.
For the three-month period ended Aug. 3, Macy’s net income was $150 million, or 53 cents a share, compared with a lack of $22 million, or 8 cents a share, in the identical period a yr earlier.
Yet even excluding the weaker stores that Macy’s is closing, sales were lackluster. Comparable sales for the namesake brand – which incorporates Macy’s stores that remain open and online sales – fell 3.3% on a owned and licensed basis, including the third-party marketplace.
Macy’s stressed that it has made progress on its turnaround plan, which it unveiled in February shortly after Spring took over as CEO of the corporate. In the primary 50 stores where additional investments were made, comparable sales on an owned-plus-license basis increased 1%. It was the second consecutive quarter of positive comparable sales in those stores because the plan began.
Spring said those 50 stores have outperformed Macy’s other stores, even in hard-hit categories like handbags. He said the corporate will announce its plans to expand the strategy beyond those stores within the fourth quarter, nevertheless it has already decided to extend staffing in the ladies’s shoe and handbag departments at several locations based on customer response.
In addition to a turbulent sales environment, Macy’s leadership has also faced an attempt by an activist group to take the corporate private. Macy’s announced last month that its board had unanimously voted to finish negotiations with Arkhouse Management and Brigade Capital.
Macy’s shares closed Tuesday at $17.74, giving it a market capitalization of $4.9 billion. Through Tuesday’s close, the corporate’s stock has fallen about 12 percent this yr, trailing the S&P 500’s gain of about 17 percent over the identical period.
