Macy’s Inc. Posts Profit despite Decreased Sales, Updates Annual Outlook
Macy’s Inc. reported a significant turnaround in its second-quarter earnings on Wednesday, posting a net income of $150 million compared to the $22 million loss experienced during the same period last year. This was achieved in spite of the challenging retail environment and reduced sales volume.
However, Macy’s did note a 3.8% decrease in net sales, totaling $4.94 billion, compared to $5.13 billion during the same period last year. There was a drop of 4% observed in comparable sales on an owned basis, and a decline of 3.3% on an owned, licensed, and marketplace basis.
In light of these figures and shifting consumer behavior, Macy’s has updated its annual outlook. The retailer now predicts net sales for the year to range between $22.1 billion and $22.4 billion, rather than the previously forecast $22.3 billion to $22.9 billion. Projected comparable sales are expected to decrease between 2% and 0.5%, over the initial projection of a 1% decrease to a 1.5% increase. The retailer’s predicted adjusted earnings per share remain at $2.55 to $2.90.
“During the second quarter, we delivered strong earnings performance in a challenging consumer environment,” said Tony Spring, Chairman and Chief Executive Officer of Macy’s Inc. “We are seeing signs of our strategy taking root, including two consecutive quarters of positive comparable sales in Macy’s first 50 locations. We are encouraged by the early traction of our ‘Bold New Chapter’ and remain committed to returning Macy’s, Inc. to sustainable profitable growth.”
The company’s ‘Bold New Chapter’ strategy includes the closure of approximately 150 low-performing locations by 2026. Investments will be prioritized in roughly 350 ‘go-forward’ locations while also expanding its small-format store chains, including Bloomie’s, Bloomingdale’s outlets, and Backstage off-price units. The strategy foresees the opening of about 15 new Bloomie’s stores and 30 Bluemercury stores in new and existing markets, accompanied by approximately 30 Bluemercury remodels. Macy’s anticipates monetizing $600 million to $750 million of assets by 2026, primarily through the sale of stores, parking lots, and some logistic centers.
Last quarter’s net sales at the Macy’s division diminished by 4.4%, while Bloomingdale’s net sales lowered by 0.2%. However, Bluemercury witnessed a promising increase in their net sales by 1.7%. Inventories swelled by 6% due to second quarter sales results and strategic investments planned for the latter half of 2024. An uptick of 240 basis points raised the gross margin rate to 40.5%.