The Macy’s logo is seen at the Macy’s store in Herald Square on January 19, 2024 in Fresh York City. Department store chain Macy’s announced it would lay off approximately 2,350 employees, representing about 3.5% of its workforce. The company says it will also close five stores to adapt to the online shopping era. (Photo: Michael M. Santiago/Getty Images)
Michael M. Santiago | News from Getty Images | Getty Images
Macy’s Fiscal first-quarter earnings topped Wall Street expectations on Tuesday, and the retailer’s revenue was roughly in line with expectations as it showed early signs of momentum in its turnaround strategy.
The department store operator raised its full-year earnings expectations to reflect first-quarter results as well as the lower end of its sales outlook. However, the retailer said in a press release that it “assumes customers will continue to exercise caution in their discretionary purchases.”
The company’s shares lost during morning trading.
On an earnings call with investors, CEO Tony Spring said the company was in the “early stages” of the recovery of its namesake stores. He added that as the retailer increased investment in 50 of its Macy’s stores, customers responded by visiting more frequently and making more constant purchases.
For example, Macy’s has made sure these stores have sales associates ready to facilitate customers in the fitting rooms, in the shoe department, and at the jewelry counters. The company launched fresh brands such as Donna Karan and expanded others such as French Connection, Free People and Hugo Boss. “Macy’s strives to give shoppers more reasons to come here, including offering personal styling sessions, fashion shows and perfume bottle engraving,” Spring added.
“We need more diversity,” he said. “We need less redundancy. We need more interest in the range and I think that makes a difference in customer acceptance in stores.”
Here’s Macy’s report for the three-month period ended May 4 compared to Wall Street expectations, based on a survey of analysts conducted by LSEG:
- Earnings per share: Adjusted 27 cents vs. expected 15 cents
- Income: Adjusted $4.85 billion vs. expected $4.86 billion
Macy’s first-quarter net income fell 60% to $62 million, or 22 cents a share, compared with $155 million, or 56 cents a share, in the year-ago quarter.
Net sales declined from $4.98 billion in the same period a year ago.
Macy’s currently projects net sales of $22.3 billion to $22.9 billion, which would still be down from $23.09 billion in 2023. It expects comparable sales, including the impact of store openings and closures, to range from a decline of approximately 1% to an escalate of 1.5% on an owned-plus-licensed basis, including sales on third-party platforms. Comparable sales were previously expected to decline by as much as 1.5%.
It expects adjusted earnings per share of $2.55 to $2.90, raising its previous forecast of $2.45 to $2.85.
Macy’s recovery strategy is taking shape
Macy’s is getting smaller as it tries to grow sales again. The department store operator, which owns Bloomingdale’s and the Bluemercury cosmetics chain, announced earlier this year that it would close about 150 stores of the same name. That’s more than a quarter of the Macy’s locations named after its namesake. In January, it already announced the closure of five stores and the layoffs of over 2,300 people.
But the retailer said it would invest in parts of the business that are performing 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.
Bloomingdale’s and Bluemercury continued to outperform their namesake brands in the first quarter. At Bluemercury, comparable sales – a measure that takes into account the impact of store openings and closures – increased 4.3%. At Bloomingdale’s, comparable sales increased 0.3% on an owned-plus-licensed basis, including sales on third-party platforms.
At Macy’s, comparable sales declined 0.4% on an owned-plus-licensed basis, including the third-party market.
The company said 150 unprofitable Macy’s stores that will close in early 2027 dragged down results.
At the approximately 350 Macy’s stores that will remain open, comparable sales increased 0.1% on an owned-plus-licensed basis. For the first 50 of these stores to raise additional investment, comparable sales were even better: an escalate of 3.4% on an owned plus licensed basis.
On the company’s performance, CFO and COO Adrian Mitchell said the company assumed in its forecasts that consumers “will remain under pressure for the remainder of the year.”
But he added that Macy’s expects growth this year as it continues its turnaround strategy online and in stores.
In addition to taking a demanding look at its store footprint, Macy’s has tried to attract more customers, including more millennial and Gen Z customers, by introducing fresh exclusive brands and revamping existing ones.
Macy’s faced another challenge: a takeover bid from an activist investor. Arkhouse management and Brigade Capital have made an offer to purchase Macy’s and take the company private. Arkhouse also fought a proxy battle, but settled the dispute in April when Macy’s agreed to add two fresh board members.
Macy’s shares closed at $19.10 on Monday, raising the company’s market value to $5.26 billion. As of Monday’s close, the company’s shares have fallen about 5% this year, lagging the S&P 500 index, which has gained about 11% over the same period.
