Macy’s On Tuesday, even if the retailer beat Wall Street’s quarterly expectations, it signaled that consumers will be more selective and more price-driven in the second half of the year.
The company’s shares fell nearly 10% in early trade as the department store operator stuck to its full-year conservative guidance. It said it expects comparable proprietary and licensed sales to decline 6% to 7.5% compared to the prior year. For the fiscal year, it expects adjusted earnings per share of $2.70 to $3.20 and sales of between $22.8 billion and $23.2 billion.
The retailer lowered the forecast in early June.
“The consumer continues to be under pressure,” CEO Jeff Gennette said in an interview with CNBC. The company said it has seen rising credit card balances on its card data. Plus, he said, people are spending on internships and preparing for student loan repayments this fall.
But Gennette said the company is focusing on products that consumers are still willing to buy, such as fragrances and other beauty products. Under the armor and Nike items that have been missing from the shelves for several years are also returning to Macy’s.
“We’re going into interesting areas,” he said. “We’re pulling back categories that aren’t performing. So we’re ready (for the second half of the year) to respond to where and when the consumer is shopping.”
Here’s how the retailer fared compared to Wall Street expectations for its fiscal second quarter ended July 29, based on a survey of analysts by Refinitiv:
- Earnings per share: 26 cents adjusted. Expected 13 cents
- Revenue: $5.13 billion, expected $5.09 billion
The company rocked To a net loss of $22 million, or 8 cents per share, from net income of $275 million, or 99 cents per share a year ago.
Net sales were down from $5.6 billion a year ago. Compared to the previous period, sales in stores decreased by 8%, and digital sales decreased by 10%.
According to Refinitiv, comparable sales on a proprietary and licensed basis fell 7.3%, slightly worse than the 6.5% decline analysts had expected.
As a retailer that sells a lot of clothing and accessories, Macy’s has been hit harder by the consumer pushback than its staple sellers. When the department store operator cut its full-year forecast earlier in the spring, it said it saw sales weaken in the spring, even at its top-tier chains, Bloomingdale’s and beauty chain Bluemercury.
Those sales patterns have remained largely the same in recent months, Gennette said. July was a strong month compared to the rest of the quarter, but consumer purchases were “great value,” he said.
Gennette added that the company has cleared spring merchandise with discounts and stocked fresh products for the fall and holiday season. Inventory is down 10% year-over-year and 18% year-over-year.
Macy’s namesake stores and website posted the weakest sales in the quarter. The chain’s comparable sales fell 8.2% on an owned and licensed basis, but bright spots included fragrances, prestige cosmetics and menswear.
At upscale department store Bloomingdale’s, comparable sales on an owned and licensed basis fell 2.6% as shoppers bought beauty items, contemporary women’s and designer apparel and shoes. The company said that sales of handbags, menswear and clothing were softer in the quarter.
Her beauty chain, Bluemercury, was distinguished by annual sales revenue. Comparable sales increased 5.8% on a proprietary basis as shoppers purchased skin care products and color cosmetics.
Financial pressures from consumers also showed on Macy’s balance sheet. Revenue from other areas of the business, including credit cards, was down $84 million for the year. The company said it expected credit card payments to increase, but they are growing faster than expected.
As Macy’s looked for ways to grow and refresh its image, it opened smaller stores in strip malls. The company announced Tuesday that it will open four more stores in the fall. So far, 10 of them have been commissioned.
Gennette said the new store type has outgrown Macy’s legacy mall anchor locations. Smaller stores that have been open for more than a year saw sales growth in the second quarter, he said.
Shares of Macy’s closed Monday at $14.73, giving the company a market value of $4.01 billion. It has underperformed the market this year as its shares have fallen 28% as the S&P 500 rose nearly 15% over the same period.
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