Macy's (M) earnings in the fourth quarter of 2023

Macy's on Tuesday said sales fell nearly 2% in the Christmas quarter, as the 166-year-old department store operator revealed its strategy to return to growth.

Here's what Macy's reported for the fourth quarter compared to what Wall Street expected, according to a survey of analysts by LSEG, formerly known as Refinitiv:

• Earnings per share: Adjusted $2.45 vs. expected $1.96
• Revenue: $8.12 billion vs. $8.15 billion expected

The retailer said it expects sales to remain stagnant. It projected net sales of between $22.2 billion and $22.9 billion for this fiscal year, up from $23.09 billion in 2023. It anticipates comparable sales, which exclude the impact of store openings and closings, will range from a decline of about of 1.5% and a gain of 1.5% compared to the prior year period on an owned plus licensed basis and including third-party market sales.

However, the company's new CEO, Tony Spring, presented a brighter outlook for the next fiscal year and how Macy's plans to get there. Spring is the former CEO of Macy's high-end department store Bloomingdale's. He took the helm earlier this month, weeks after Macy's announced layoffs and while facing pressure from activist investors.

In an interview with CNBC, he said the company is taking a clear look at its business, particularly its struggling namesake stores.

“Yes, there are headwinds, certainly in the discretionary categories and in the middle-income consumer, but we take responsibility for what we control,” he said. “Let's put better products in our stores. Let's make sure they are properly merchandised at a decent value. And then we will have more opportunities for conversion and more [market] share.”

As part of the retailer's effort to attract shoppers and restore investor confidence, Macy's said it will make big changes to its store presence. Macy's plans to close around 150 unproductive locations and prioritize investment in around 350 other eponymous locations.

It plans to focus more on selling luxury goods by opening about 15 new Bloomingdale's stores and at least 30 new Bluemercury stores over the next three years. It will also remodel approximately 30 of the beauty chain's existing stores during that time.

Macy's had already announced the closure of five stores and more than 2,300 layoffs last month. He also said last year that it would open up to 30 smaller versions of its namesake stores in shopping centers over the next two years.

In a news release Tuesday, Macy's said it will also take a closer look at how to operate more efficiently, such as examining the network of warehouses used for its e-commerce business.

In the fiscal year beginning in early 2025, Macy's said it expects comparable annual sales growth in the low single digits, including owned, licensed and marketplace sales. It said it expects capital spending to fall below 2024 levels and free cash flow to fall to pre-pandemic levels. His outlook does not include any potential impact of a proposed resolution on credit card late fees by the federal government.

Macy's, which includes its namesake brand, Bloomingdale's and Bluemercury, has faced scrutiny from activist investors Arkhouse Management and Brigade Capital Management, who made a rejected bid to buy the retailer. Arkhouse recently nominated a slate of nine directors to Macy's board of directors.

For the fiscal fourth quarter ended Feb. 4, Macy's posted a loss of $71 billion, or 26 cents per share, from net income of $508 million, or $1.83 per share, a year earlier. . The losses included $1 billion in impairment and restructuring costs related to Macy's plans to close about 150 locations, which are part of its turnaround strategy.

Revenue fell from $8.26 billion in the same period a year earlier. Digital sales decreased 4% compared to the prior-year quarter and physical sales were broadly stable.

Companywide, comparable owned-plus-licensed sales fell 4.2% from the same period last year. That was better than the 5.8% drop analysts had expected, according to LSEG.

Macy's remained the weakest retail brand, a trend reflected in the company's plans to close many of its stores. Comparable sales at the eponymous store, both owned and licensed, fell 4.7%, while the women's shoes and cold-weather clothing and accessories categories struggled. Beauty and Macy's discount business, Backstage, outperformed in the quarter.

Bloomingdale's and Bluemercury, the two retail chains the parent company plans to expand, fared better in the Christmas quarter.

At Bloomingdale's, comparable sales declined 1.6% on an owned and licensed basis as the men's and designer handbag businesses fell.

Bluemercury's comparable sales rose 2.3% as shoppers snapped up skincare and color cosmetics.

Net credit card revenue also took a hit, as Macy's said. fell 26% from a year earlier to $195 million as the company faced higher net credit card losses.

So far this year, Macy's shares have fallen about 4%. The company's shares have underperformed the S&P 500's earnings by about 6% over the same period. Macy's shares closed Monday at $19.30, bringing the company's market value to $5.29 billion.

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