Macy’s Inc. Shares Fall Sharply as Retailer Cuts Outlook

This story has been updated.

Macy's Partners With Rokt Tech Firm to Advance Its Media Network

Macy’s Inc. , demonstrating strong operating discipline in a tough retail environment, turned profitable in the second quarter despite reduced sales volume which caused it to lower its outlook for the year.

The company updated its annual outlook to reflect a more “choiceful” consumer and heightened promotional environment relative to its prior expectations.

Net sales for the year are now projected at $22.1 billion to $22.4 billion versus previous guidance of $22.3 billion to $22.9 billion. Comparable sales are now projected down 2 percent to 0.5 percent, versus previous guidance of down 1 percent to up 1.5 percent. The projected adjusted earnings per share for the year is unchanged at $2.55 to $2.90.

Wall Street reacted negatively to Macy’s lowered forecast for 2024 sales and the second-quarter sales drop, pushing the retailer’s stock price down 12.9 percent, or $2, to $15.45.

On Wednesday, the company reported net income of $150 million for the second quarter ended Aug. 3, beating expectations, compared to a loss of $22 million in the year-ago period.

However, net sales decreased 3.8 percent to $4.94 billion, from $5.13 billion in the year-ago period. Comparable sales were down 4 percent on an owned basis and down 3.3 percent on an owned, licensed and marketplace basis.

Macy’s Inc.’s go-forward business comparable sales, including its go-forward locations and digital operatin, were down 3.8 percent on an owned basis, and down 3 percent on an owned, licensed and marketplace basis.

In an interview with WWD, Tony Spring, chairman and chief executive officer of Macy’s Inc., said, “I’m pleased with the gross margin, expense controls and we beat expectations on the bottom line, but the top line was softer. The consumer is very choiceful and very discerning. We have to lean in and create reasons for people to buy. There is a high degree of uncertainty. All customers are price conscious. People are asking, ‘Should I wait a little [on purchasing]? Is the stock market stable?'”

Spring added that higher food and rent prices and declining savings rates are impacting discretionary spend not only by lower and middle income spending, but even the affluent with money to spend, are more cautious.

The calendar for the 2024 holiday season isn’t favorable for retailers. There five fewer days between Thanksgiving and Christmas, but Spring said that would make the latter part of November more important, and should compress the extent of the usual spending lull that occurs after the Thanksgiving period and Cyber Monday until about 10 days before Christmas.

Though Macy’s Inc. has lowered its sales guidance for 2024, Spring said, “We’re not planning holiday down because of the calendar change.”

Although the year’s top line is planned down, Macy’s should get a lift in sales during the second half from the upcoming “From Italy, With Love” event at Bloomingdale’s and Bluemercury’s 25th birthday celebration.

Macy's Chief Merchandising Officer Named the Fragrance Foundation's 2024 Circle of Champions Honoree

Asked how the “Bold New Chapter” multiprong strategy for transforming Macy’s is going, Spring told WWD, “We’re two quarters into a three-year plan and I would love to be faster ahead in the plan, but we have tremendous confidence in the team.…I wouldn’t change a thing about the overall strategy,” though certain tactics could be adapted, he added, noting that the plan to close 50 stores this year has accelerated to 55 locations due to a better-than-expected response from landlords, a strong demand for real estate, and expected rate drops.

Macy’s Bold New Chapter strategy, revealed last February, involves closing about 150 underproductive locations through 2026, including the 55 by the end of the fiscal year; prioritizing investment in about 350 “go-forward” locations, and expanding its small-format store chains. The corporation’s small retail formats are Bloomie’s, the specialized and downsized Macy’s units, Bloomingdale’s outlets and Backstage off-price units.

More specifically, the strategy calls for opening about 15 Bloomie’s stores and at least 30 Bluemercury stores in new and existing markets over the next three years, along with roughly 30 Bluemercury remodels. Bloomie’s locations are downsized versions of the full-line Bloomingdale’s offering a curated assortment weighted toward contemporary and luxury brands. Macy’s also expects to monetize $600 million to $750 million of assets through 2026, mostly through selling off stores, outparcels such as parking lots, as well as some logistic centers.

Of the 350 go-forward locations, there is better than expected return on investments being made in the first 50 top Macy’s department stores around the country receiving heightened investment. That program, Spring said during the interview, began at the beginning of February 2024 following some testing of some ideas in the third and fourth quarters of 2023. The 50 sites saw positive comp growth in the first two quarters of this year, Spring said. Investments have included additional staffing by women’s fitting rooms, at checkout areas and in women’s shoes and handbags; improved visual merchandising; beefing up better-selling brands, and editing out less productive brands, making the stores cleaner.

Last quarter’s net sales at the Macy’s division were down 4.4 percent. Comparable sales were down 4.5 percent on an owned basis and down 3.6 percent on an owned-plus-licensed-plus-marketplace basis. Macy’s go-forward business comparable sales, including Macy’s go-forward locations and digital, dropped 4.3 percent on an owned basis and were down 3.3 percent on an owned, licensed and marketplace basis.

Bloomingdale’s net sales were down 0.2 percent last quarter; comparable sales were down 1.1 percent on an owned basis and down 1.4 percent on an owned, licensed and marketplace basis. Bluemercury net sales were up 1.7 percent. Comparable sales were up 2 percent on an owned basis.

Macy’s sales results contrasted sharply with those of TJX Cos. which in the second quarter scored a comparable-store sales gain of 4 percent, exceeding the offpricer’s and Wall Street’s guidance by a couple of points.

In other Macy’s second-quarter results, inventories increased 6 percent and were higher-than-expected due to second-quarter sales results as well as the decision to invest into areas of strength for the second half of 2024. The gross margin rate of 40.5 percent increased 240 basis points.

“During the second quarter, we delivered strong earnings performance in a challenging consumer environment,” Spring said in a statement. “Our colleagues executed with discipline, supporting gross margin expansion and effective expense control throughout the organization. We are seeing signs of our strategy taking root, including two consecutive quarters of positive comparable sales in Macy’s first 50 locations. We are encouraged by the early traction of our ‘Bold New Chapter’ and remain committed to returning Macy’s Inc. to sustainable profitable growth.”

David Silverman, senior director at Fitch Ratings, commented that Macy’s second-quarter results “underscore softening spending on discretionary goods but provide evidence of Macy’s efforts to respond to external challenges and some progress on its longer term goals. The company’s top line fell behind expectations as consumers pull back purchasing on categories like apparel, but margins rose as the company maintained tight control around expenses and inventory purchases. The company indicated better results at the 50 stores where Macy’s is testing new initiatives, offering some hope that Macy’s can implement change to eventually support top-line stabilization across the chain.”

Silverman also said Fitch expects Macy’s “to continue to contend with near-term consumer spending headwinds and ongoing secular shifts in consumer behavior affecting regional malls, somewhat mitigated by Macy’s internal efforts to manage expenses and introduce new ideas to drive traffic and loyalty.”

Fashion Gets Caught Up in the Stock Market Sell-off