Macy’s, the iconic department store operator, has cut its full-year sales forecast due to challenges with selective shoppers and increased promotions. While the company exceeded Wall Street’s earnings expectations, it fell short on revenue. Macy’s now anticipates net sales of $22.1 billion to $22.4 billion, lower than the previously projected range of $22.3 billion to $22.9 billion. This represents a decline from the $23.09 billion reported in fiscal 2023.
The retailer also adjusted its expectations for comparable sales, which exclude the impact of store openings and closures. It now anticipates a decrease of about 2% to a decline of about 0.5%, compared to the previous forecast of a decline of about 1% to a gain of 1.5%. Macy’s attributed this revised outlook to the ongoing uncertainty in the discretionary consumer market.
In an interview with CNBC, CEO Tony Spring acknowledged a cautious consumer environment, stating that even affluent shoppers are not spending as freely as they were a year ago. He noted that customers are responding to sharply priced items and new products, but overall, there is a delay in purchasing decisions.
Macy’s reported earnings per share of 53 cents, adjusted, surpassing the expected 30 cents per share. However, revenue came in at $4.94 billion, falling short of the anticipated $5.12 billion. As a result, shares dropped about 8% in premarket trading.
To regain stability and achieve sustained growth, Macy’s announced plans to close approximately 150 stores, roughly a third of its namesake locations, while investing in the remaining 350 stores. The company aims to complete these closures by early 2027. Additionally, Macy’s is opening new, smaller stores in suburban strip malls and expanding its better-performing brands, Bloomingdale’s and Bluemercury.
Despite these efforts, Macy’s struggles to make a comeback in a market where consumers have become more selective in their purchases, particularly for non-essential items. Net sales for the recent quarter fell from $5.13 billion in the previous year. The Macy’s brand experienced a decline of 3.6% in comparable sales, while Bloomingdale’s saw a 1.4% decline and Bluemercury achieved a 2% increase.
However, Macy’s highlighted progress in its turnaround plan, noting that the first 50 stores to receive additional investment saw a 1% increase in comparable sales. This marked the second consecutive quarter of positive sales for those stores. Nevertheless, even excluding the weaker stores that are closing, sales remained lackluster. Comparable sales for the go-forward Macy’s brand declined 3.3%, including online sales and the third-party marketplace.
In addition to the challenging sales environment, Macy’s faced a bid by an activist group to take the company private. However, the company announced last month that it had ended negotiations with Arkhouse Management and Brigade Capital.
Macy’s stock closed at $17.74 on Tuesday, with a market cap of $4.9 billion. The stock has experienced a decline of approximately 12% so far this year, trailing behind the 17% gains of the S&P 500 during the same period.
