Macy’s Inc. Posts Tough Q1 With Sales and Profit Declines
Macy’s Inc., impacted by consumers pressured by inflation and shifting some spending from material goods and toward travel, dining and other experiences, saw both its bottom line and sales revenues drop in the first quarter.
Net income for the quarter ended May 4 came to $62 million, compared with $155 million in the year-ago quarter.
Net sales of $4.85 billion were down 2.7 percent from $4.98 billion. Operating income came to $125 million versus $244 million.
Comparable sales were down 1.2 percent on an owned basis and down 0.3 percent on an owned-plus-licensed-plus-marketplace basis.
However, the results beat the expectations of Wall Street, which in pre-market trading Tuesday pushed Macy’s stock price up 3.5 percent to $19.77. In addition, Macy’s indicated that in 50 stores where it is piloting staff changes, merchandise upgrades and more animated visuals, there was a 3.4 percent sales comp gain.
Back in February, Macy’s revealed its “Bold New Chapter” strategy involving closing approximately 150 Macy’s department stores through 2026 including about 50 this year, and investing in the 350 better-performing department stores, which Macy’s refers to as its “go-forward” stores. The strategy also calls for investing in the luxury side of its business and further expanding its small-format store chains which are Bloomie’s, the specialized and downsized Macy’s units, Bloomingdale’s outlets and Backstage off-price units. The retailer is planning to open 30 small-format units this year and next year, in addition to the dozen already operating.
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“We are encouraged by our customers’ response to our Bold New Chapter strategy resulting in sales near the high end of our outlook. Our teams executed with discipline and efficiency, which contributed to first-quarter earnings that exceeded our expectations,” Tony Spring, chairman and chief executive officer of Macy’s Inc., said in a statement.
“At the Macy’s nameplate, go-forward business performance was led by our first 50 locations, which achieved comparable sales growth year over year and are a leading indicator for our go-forward fleet,” Spring added. “Although early days, our investments in product, presentation and experience are gaining traction and reinforce our belief that longer-term, Macy’s Inc. can return to sustainable, profitable growth.”
In April, Macy’s Inc. appointed two new independent directors, Richard Clark and Richard L. Markee, ending a proxy fight over control of the retailer’s board with activist investor Arkhouse Management Co.
In turn, Arkhouse withdrew its push to remake the company’s board in more dramatic fashion with nine director nominees who would have been voted on at Macy’s annual shareholders’ meeting. Clark and Markee were among the nine who had been nominated by Arkhouse for the board. While the two sides have settled on the board composition, Arkhouse, along with Brigade Capital Management, is still pursuing a takeover of Macy’s. The pair have proposed buying Macy’s Inc. for $24 a share, or $6.6 billion. Macy’s rejected an earlier bid from Arkhouse and Brigade that would have valued the company at $21 a share, or $5.8 billion.
In Macy’s “go-forward” business, comparable sales, including stores and digital, were down 0.9 percent on an owned basis and up 0.1 percent on an owned-plus-licensed-plus-marketplace basis.
At the Macy’s division, comparable sales were down 1.6 percent on an owned basis and down 0.4 percent on an owned-plus-licensed-plus-marketplace basis. At the Macy’s division, go-forward locations comparable sales up 0.1 percent on both an owned and owned-plus-licensed basis.
Bloomingdale’s comparable sales increased 0.8 percent on an owned basis and up 0.3 percent on an owned-plus-licensed-plus-marketplace basis.
Bluemercury comparable sales were up 4.3 percent on an owned basis.
In other results:
- Credit card revenues declined by $45 million to $117 million. The decline was attributable to the impact of expected higher delinquency rates and net credit losses within the portfolio.
- Merchandise inventories were up 1.7 percent. “Entering the second quarter of 2024, end-of-quarter inventories are well-positioned for the upcoming summer season,” Macy’s stated.
- Gross margin rate for the quarter was 39.2 percent, down from 40 percent in the first quarter of 2023.
- Merchandise margin declined 100 basis points, primarily reflecting additional discounting for slower-moving warm weather products.
- Macy’s Media Network revenue rose $8 million to $37 million from increased vendor engagement.
Macy’s raised its guidance slightly, forecasting 2024 sales of $22.3 billion to $22.9 billion for this year, compared with previous guidance of $22.2 billion to $22.9 billion. Adjusted earnings per share is seen at $2.55 to $2.90, up from previous guidance of $2.45 to $2.85.
