Macy’s reported another quarter of declining sales, with a 3.8% year-over-year decrease in net sales to $4.9 billion, falling short of estimates. Same-store sales also dropped by 4%, which was worse than anticipated, leading to a significant drop in the company’s stock price.
Despite these challenges, Macy’s exceeded Wall Street’s expectations in adjusted earnings, achieving $0.53 per share. However, the company’s CFO and COO, Adrian Mitchell, noted that consumers are still under pressure in discretionary spending, which continues to impact overall sales performance.
The disappointing sales results came shortly after Macy’s declined a $6.9 billion buyout offer from Arkhouse and Brigade Capital Management. Macy’s management determined that the offer was not compelling enough, given the company’s potential and ongoing turnaround strategy, which is branded as “A Bold New Chapter.”
The strategy focuses on restructuring the company, including a significant reduction in its real estate portfolio and the closure of underperforming stores. Management is optimistic that these efforts will enhance Macy’s value beyond the rejected offer.
Part of Macy’s turnaround strategy includes closing a total of 150 stores, with the first wave of 55 closures expected this year. The company has seen some positive signs from its initiatives, such as the improvement in sales at the 50 locations where new strategies have been implemented.
However, other stores that did not receive these upgrades experienced sales declines, highlighting the challenges Macy’s faces in revitalizing its operations. CEO Tony Spring emphasized the company’s commitment to executing the turnaround plan swiftly and effectively.
Despite these efforts, analysts remain cautious. Morgan Stanley’s Alex Straton noted that the market might gain more confidence in Macy’s plan by mid-2025 after the initial store closures and investments show clearer results.
Meanwhile, foot traffic at Macy’s stores has been inconsistent, with some improvement noted during back-to-school shopping, though overall visits have declined compared to the previous year.
Macy’s luxury subsidiaries also faced mixed results, with Bloomingdale’s seeing a slight decline in same-store sales, while Bluemercury experienced growth, particularly in the beauty segment.
Looking ahead, Macy’s has lowered its financial outlook for the remainder of 2024, anticipating continued pressure on sales. The company expects net revenue to fall between $22.1 billion and $22.4 billion, with same-store sales projected to decline by 2% to 5% year-over-year.
Management is closely monitoring various economic indicators and remains focused on managing inventory levels and refining marketing strategies. As the holiday season approaches, Macy’s is hopeful that its refreshed product assortment and exclusive partnerships will resonate with consumers, despite the shortened shopping period and other potential challenges.
