The Macy's corporate logo is seen at the Macy's store in Herald Square on January 19, 2024 in New York City. Macy's has announced that it will lay off approximately 2,350 employees, representing about 3.5% of its workforce. The company says it will also close five stores in order to adapt to the era of online shopping. (Photo by Michael M. Santiago/Getty Images)
Michael M. Santiago | Getty Images News | Getty Images
Messi Fiscal first-quarter earnings beat Wall Street expectations on Tuesday, as the retailer said it saw early signs of momentum in its turnaround strategy.
However, the department store operator's quarterly revenue fell short of expectations. Macy's net sales were about 3% lower than a year ago, as its website and namesake store remained the weakest parts of the business.
Macy's raised its full-year earnings forecast to reflect the first-quarter win, along with its lower-end sales forecast. But the retailer said in a press release that it “assumes customers will continue to be discriminating in their discretionary purchases.”
Macy's is getting smaller as it tries to boost sales again. The store operator, which includes Bloomingdale's and cosmetics chain Bloomingdale's, said earlier this year that it would close about 150 of its namesake stores. That's more than a quarter of Macy's locations of the same name. It has already announced the closure of five stores and layoffs of more than 2,300 workers in January.
However, the retailer said it would invest in parts of the business that performed better, including the roughly 350 Macy's stores that will remain open. It plans to open more Bloomingdale's and Bluemercury locations, and smaller Macy's stores in suburban malls.
So far, Macy's has focused on 50 stores with the same name. For example, these locations have a clearer display of merchandise and a larger number of employees on the sales floor to assist shoppers.
In a press release, CEO Tony Spring said Macy's first 50 stores delivered the strongest performance of its namesake stores this quarter — a potentially promising indicator.
“Although it is early days, our investments in product, offering and experience are gaining momentum and strengthen our belief that over the long term Macy's, Inc. can return to sustainable, profitable growth,” he said.
Here's what Macy's reported for the three-month period ending May 4 compared to what Wall Street expected, based on a poll of analysts conducted by LSEG:
Earnings per share: 27 cents, adjusted vs. 15 cents expected. Revenue: $4.85 billion, adjusted vs. $4.86 billion expected.
Macy's net income in the first quarter fell 60% to $62 million, or 22 cents per share, compared with $155 million, or 56 cents per share, in the same quarter a year ago.
Net sales decreased from $4.98 billion in the same period last year.
Macy's now expects net sales to be between $22.3 billion and $22.9 billion, which would still be down from $23.09 billion in 2023. It expects comparable sales, which take the impact of store openings and closings, to be down about 1%. To a profit of 1.5% based on ownership plus licensing including third party marketplace sales. It had previously expected comparable sales to decline by up to 1.5%.
It expects adjusted earnings per share to be between $2.55 and $2.90, upping its previous forecast of $2.45 to $2.85.
In the company's press release, Macy's said the updated forecast reflects first-quarter results and the evolving economic backdrop. She said she “still views 2024 as a transitional and investment year.”
In the first quarter, Bloomingdale's and Bluemercury continued to perform better than the company's namesake brand. At Bluemercury, comparable sales, a measure that takes the impact of store openings and closings, rose 4.3%. At Bloomingdale's, comparable sales increased 0.3% on a proprietary plus licensing basis, including third-party marketplace sales.
At Macy's, comparable sales were down 0.4% on a proprietary plus licensing basis, including the third-party market.
The company said 150 underperforming Macy's stores — which will close by early 2027 — dragged down results.
At the roughly 350 Macy's stores that will remain open, comparable sales rose 0.1% on a proprietary-plus-licensed basis. In the first 50 of those stores that received the additional investment, comparable sales were better: up 3.4% on an ownership-plus-licensing 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 existing ones.
Macy's faced 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.
Macy's shares closed Monday at $19.10, bringing the company's market value to $5.26 billion. As of Monday's close, the company's stock was down about 5% so far this year, lagging the S&P 500's gain of about 11% over the same period.
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