Macy’s cut its full-year sales forecast on Wednesday as the department store manager said it faces picky shoppers and more deals.
The retailer posted a mixed quarter as it beat Wall Street’s profit expectations but missed on revenue.
Macy’s said it now expects net sales of between $22.1 billion and $22.4 billion, down from the range of $22.3 billion to $22.9 billion it had previously forecast. That would also be a year-over-year drop from the $23.09 billion it reported for fiscal 2023.
Macy’s expects comparable sales, which strip out the impact of store openings and closings, to range from a decline of about 2% to a decline of about 0.5%. It previously expected comparable sales to range from a decline of about 1% to a gain of 1.5%. This metric includes owned and licensed sales, which include merchandise that Macy’s owns and items from brands that pay for space in its stores, along with Macy’s third-party online marketplace.
The department store operator said in a press release that the new set of prospects “provides the flexibility to address continued uncertainty in the discretionary consumer market.”
In an interview with CNBC, CEO Tony Spring said customers don’t spend as liberally across all Macy’s brands — even at upscale department store Bloomingdale’s.
“We’re seeing that there’s definitely a softness, a caution, a lag in the conversion of the markets,” he said. “And people for the things they want, for the things that are high-priced, for the new, they’re responding, but even the affluent consumer isn’t spending like they were a year ago.”
He said “there’s a lot of noise out there” distracting customers or causing them to delay spending, including higher interest rates, inconsistent weather and a busy news cycle.
Here’s what Macy’s reported for the fiscal second quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 53 cents adjusted vs. 30 cents expected
- Annuity: $4.94 billion versus $5.12 billion expected
The company’s shares closed nearly 13% lower on Wednesday.
The flagship department store is pushing to return to a more stable footing and steady growth. Spring announced in February that the retailer would close about 150 – or nearly a third – of its namesake stores and invest in its roughly 350 remaining locations. It plans to close the locations by early 2027.
It is also opening new, smaller Macy’s stores in suburban malls and adding locations of its best-performing brands, Bloomingdale’s and Bluemercury.
But Macy’s results in the latest quarter revealed it is struggling to return to a time when consumers were more selective about what they buy — especially items that are wants rather than needs.
Net sales were down from $5.13 billion in the prior period.
Macy’s namesake brand continued to be the company’s weakest performer. Comparable sales decreased 3.6% on a proprietary plus license basis, including third-party purchases.
At Bloomingdale’s, comparable sales fell 1.4% on an owned plus licensed basis, including third-party purchases. And Bluemercury’s comparable sales rose 2%, marking the 14th consecutive quarter of comparable sales growth for the beauty brand.
In the quarter ended Aug. 3, Macy’s net income was $150 million, or 53 cents a share, compared with a loss of $22 million, or 8 cents a share, in the prior period.
But even excluding the weaker stores that Macy’s is closing, sales were weak. Comparable sales for its branded brand — which includes Macy’s stores that will remain open and online sales — fell 3.3 percent on an owned-plus-licensed basis, including the third-party purchase.
Macy’s emphasized that it has made progress on the turnaround plan, which it unveiled in February shortly after taking over the company’s top role in the spring. In the first 50 of its stores for additional investment, comparable sales increased 1% on an owned and licensed basis. It marked the second straight quarter of positive comparable sales at those stores since the plan began.
Spring said those 50 stores outnumber other Macy’s locations, even in categories like handbags. He said the company will share its plans to expand the strategy beyond those stores in the fourth quarter, but has already decided it will consolidate staff in the women’s shoe and bag departments at more of its locations because of customer response. .
Along with a volatile sales environment, Macy’s leaders had also faced an attempt by an activist group to take the company private. Macy’s said last month that its board had unanimously decided to end negotiations with Arkhouse Management and Brigade Capital.
Shares of Macy’s closed at $15.45 on Wednesday, bringing the company’s market capitalization to $4.3 billion. As of Wednesday’s close, the company’s stock is down about 23% so far this year. That follows the S&P 500’s more than 17% gain over the same period.
