The Macy’s company logo is seen at the Macy’s store on Herald Square on January 19, 2024 in New York City. Macy’s department-store chain announced that they will be laying off roughly 2,350 employees which is about 3.5% of their workforce. The company says that it will also be closing five stores in order to adjust to the online-shopping era. (Photo by Michael M. Santiago/Getty Images)
Michael M. Santiago | Getty Images News | Getty Images
Macy’s fiscal first-quarter earnings topped Wall Street’s expectations on Tuesday, and the retailer’s revenue came in 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 earnings expectations to reflect the first-quarter beat, along with the low end of its sales outlook. But the retailer said in a news release that it “assumes customers will continue to be discerning in their discretionary purchases.”
The company’s shares were down in morning trading.
On an earnings call with investors, CEO Tony Spring said the company is in the “early innings” of turning around its namesake stores. As the retailer has stepped up investments at 50 of its Macy’s stores, customers have responded by visiting more often and buying more when they do, he said.
For example, Macy’s has made sure there are sales associates at those stores ready to help customers in the fitting rooms and shoe department, and at jewelry counters. The company has rolled out new brands like Donna Karan and expanded others like French Connection, Free People and Hugo Boss. And Macy’s has tried to give shoppers more reasons to stop by, such as by offering personal styling sessions, fashion shows and fragrance bottle engraving, Spring added.
“We need more variety,” he said. “We need less redundancy. We need more interest within the assortment and I think that’s making a difference in the customer’s reception to the stores.”
Here’s what Macy’s reported for the three-month period that ended May 4 compared with what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 27 cents adjusted vs. 15 cents expected
- Revenue: $4.85 billion adjusted vs $4.86 billion expected
Macy’s first-quarter net income tumbled 60% to $62 million, or 22 cents per share, compared with $155 million, or 56 cents per share, in the year-ago quarter.
Net sales fell from $4.98 billion in the year-ago period.
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. It expects comparable sales, which take out the impact of store openings and closures, to range from a decline of about 1% to a gain of 1.5% on an owned-plus-licensed basis and including third-party marketplace sales. It had previously expected comparable sales to decline 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 that it would close about 150 of its namesake stores. That’s more than a quarter of its namesake Macy’s locations. It had already announced five store closures and more than 2,300 layoffs in January.
Yet the retailer said it will invest in parts of the business that have fared better, including the roughly 350 Macy’s stores that will stay open. It plans to open more Bloomingdale’s and Bluemercury locations, and smaller Macy’s stores in suburban strip malls.
In the first quarter, Bloomingdale’s and Bluemercury continued to fare better than the company’s namesake brand. At Bluemercury, comparable sales, a metric that takes out the impact of store openings and closures, rose 4.3%. At Bloomingdale’s, comparable sales increased 0.3% on an owned-plus-licensed basis, including third-party marketplace sales.
At Macy’s, comparable sales declined 0.4% on an owned-plus-licensed basis, including the third-party marketplace.
The company said the 150 underperforming Macy’s stores – which will close by early 2027 – dragged down the results.
At the approximately 350 Macy’s stores that will stay open, comparable sales were up 0.1% on an owned-plus-licensed basis. At the first 50 of those stores to get additional investment, comparable sales were even better: up 3.4% on an owned-plus-licensed basis.
On the company’s earnings call, CFO and COO Adrian Mitchell said the company assumes in its outlook that consumers “will remain under pressure for the balance of the year.”
But, he added, Macy’s expects to get a lift this year as it pushes ahead with its turnaround strategy online and in stores.
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 its existing ones.
Macy’s has contended with 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 battle, but settled the fight in April when Macy’s agreed to add two new board members.
Shares of Macy’s closed Monday at $19.10, bringing the company’s market value to $5.26 billion. As of Monday’s close, the company’s stock has fallen about 5% so far this year, lagging behind the S&P 500’s approximately 11% gains during the same period.