Macy’s Exceeds Q1 Estimates Amid Turnaround Consideration

Macy's NYSE:M

Macy’s Inc. (NYSE:M) outperformed subdued Q1 forecasts while potential buyout discussions loom in the background.

On Tuesday morning, the retail giant revealed revenues of $4.85 billion, a 2.7% decline from the previous year but slightly surpassing Wall Street’s $4.81 billion estimates. Adjusted earnings per share stood at $0.27, exceeding the expected $0.14.

Company-owned stores experienced a mere 1.2% decrease in same-store sales, surpassing Wall Street’s prediction of a 3.01% dip.

Adrian Mitchell, Macy’s CFO and COO, expressed optimism about the company’s progress, particularly with the implementation of changes outlined in the “Bold New Chapter” initiative introduced by CEO Tony Spring earlier this year. The strategy involves closing 150 underperforming stores, enhancing remaining stores and product assortments, and investing in digital sales.

During the quarter, focus stores witnessed a 0.1% growth in same-store sales, contrasting with a 4.5% decline in closing locations. Spring attributed this improvement to the introduction and expansion of brands like Donna Karan, French Connection, Free People, Karl Lagerfeld, and Hugo Boss.

Macy’s now projects net revenue for 2024 to range between $22.3 billion and $22.9 billion, with same-store sales anticipated to fluctuate between a 1% decrease and a 1.5% increase compared to the previous year.

Adjusted earnings expectations for the year have also been revised upwards, with a new range of $2.55 to $2.90 compared to the previous estimate of $2.45 to $2.85.

Despite these positive developments, Wall Street analysts remain cautious about Macy’s prospects. UBS analyst Jay Sole expressed skepticism, stating that the success of the new initiatives is uncertain.

Zachary Warring, CFRA analyst, anticipates continued sales decline for Macy’s over the next five years, attributing it to increased competition from off-price retailers, brands, and e-commerce giant Amazon.

The company did not provide any updates on the $6.6 billion buyout offer from Arkhouse Management and Brigade, indicating its focus on streamlining operations and enhancing customer experience as a publicly traded entity.

As of Monday’s market close, Macy’s boasts a market capitalization of approximately $5.3 billion.

Here’s a summary of Macy’s Q1 performance compared to analyst expectations:

  • Net sales: $4.85 billion vs. $4.81 billion
  • Adjusted EPS: $0.27 vs. $0.14
  • Same-store sales: -0.30% vs. -2.78%
  • Licensed stores: 0.90% vs. 0.30%
  • Company-owned stores: -1.2% vs. -3.01%
  • Gross margin: 39.2% vs. 39.63%
  • Adjusted net income: $77 million vs. $39.6 million

Macy’s subsidiaries, Bloomingdale’s and Bluemercury, both reported positive same-store sales growth of 0.8% and 4.3%, respectively, with beauty products emerging as a top-performing category.

Credit card revenue decreased to $117 million, attributed to anticipated higher delinquency rates and net credit losses.

Looking ahead, Macy’s may introduce more promotions or discounts in Q2 to attract value-focused customers, while closely monitoring merchandise margin and inventory levels.

Featured Image: Megapixl

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