The Macy's company logo is seen at the Macy's store in Herald Square on January 19, 2024 in New York City. The department store chain Macy's announced that it will lay off approximately 2,350 employees, which represents approximately 3.5% of its workforce. The company says it will also close five stores to adapt to the era of online shopping. (Photo by Michael M. Santiago/Getty Images)
Miguel M. Santiago | Getty Images News | fake images
Macy's Fiscal first-quarter earnings beat Wall Street expectations on Tuesday, and the retailer's revenue was roughly in line with revenue expectations as it pointed to early signs of momentum in its turnaround strategy.
The department store operator raised its full-year profit expectations to reflect the pace of the first quarter, along with the lower end of its sales outlook. But the retailer said in a news release that it “assumes that customers will continue to be discerning in their discretionary purchases.”
The company's shares fell in morning trading.
In an earnings call with investors, CEO Tony Spring said the company is in the “early stages” of transforming its namesake stores. As the retailer has increased investments in 50 of its Macy's stores, customers have responded by visiting them more often and buying more when they do, he said.
For example, Macy's has made sure there are sales associates in those stores ready to help customers in the fitting rooms and shoe department, and at the jewelry counters. The company has launched new brands such as Donna Karan and expanded others such as French Connection, Free People and Hugo Boss. And Macy's has tried to give shoppers more reasons to visit, such as offering personal styling sessions, fashion shows and fragrance bottle engravings, Spring added.
“We need more variety,” he said. “We need less redundancy. We need more interest within the assortment and I think that is making a difference in customer reception in stores.”
Here's what Macy's reported for the three months ended May 4 compared to what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: Adjusted 27 cents vs. expected 15 cents
- Revenue: Adjusted $4.85 billion vs. expected $4.86 billion
Macy's first-quarter net income fell 60% to $62 million, or 22 cents per share, compared with $155 million, or 56 cents per share, in the year-earlier quarter.
Net sales fell from $4.98 billion in the same period last year.
Macy's now anticipates net sales of between $22.3 billion and $22.9 billion, which would still represent a drop from $23.09 billion in 2023. Expects comparable sales, which eliminate the impact of store openings and closings, to range from a decline of approximately 1% to a gain of 1.5% on an owned-plus-licensed basis and including sales in third-party marketplaces . It had previously expected comparable sales to decline by as much as 1.5%.
It expects adjusted earnings per share of between $2.55 and $2.90, raising its previous outlook of between $2.45 and $2.85.
Macy's turnaround strategy takes shape
Macy's is getting smaller as it tries to grow sales again. The department store operator, which includes Bloomingdale's and beauty chain Bluemercury, said earlier this year it would close about 150 of its namesake stores. That's more than a quarter of the Macy's locations of the same name. It had already announced five store closures and more than 2,300 layoffs in January.
However, the retailer said it will invest in parts of the business that have done better, including the roughly 350 Macy's stores that will remain open. He plans to open more Bloomingdale's and Bluemercury locations, and smaller Macy's stores in suburban shopping centers.
In the first quarter, Bloomingdale's and Bluemercury continued to outperform the company's namesake brand. At Bluemercury, comparable sales, a metric that excludes the impact of store openings and closings, rose 4.3%. At Bloomingdale's, comparable sales increased 0.3% on an owned and licensed basis, including sales on third-party marketplaces.
At Macy's, comparable sales decreased 0.4% on an owned and licensed basis, including the third-party market.
The company said the 150 underperforming Macy's stores, which 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 and licensed basis. In the first 50 of those stores that got additional investment, comparable sales were even better: an increase of 3.4% in terms of ownership and licensing.
On the company's earnings conference call, Chief Financial Officer and Chief Operating Officer Adrian Mitchell said the company assumes in its outlook that consumers “will remain under pressure for the remainder of the year.”
But he added that Macy's hopes to get a boost this year as it moves forward with its turnaround strategy online and in stores.
In addition to taking a hard look at its store presence, Macy's has tried to attract more customers, including more millennial and Gen Z shoppers, by launching new exclusive brands and refreshing existing ones.
Macy's has faced another challenge: a takeover bid by an activist investor. Arkhouse Management and Brigade Capital have made an offer to buy Macy's and take the company private. Arkhouse also fought a proxy battle, but the fight was resolved in April when Macy's agreed to add two new members to the board of directors.
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 shares have fallen about 5% so far this year, lagging the S&P 500's gains of about 11% over the same period.
