Decline in Sales Amid Strategic Shift
Macy’s Inc. (NYSE:M) is experiencing another challenging quarter with a 3.8% decline in net sales year-over-year, totaling $4.9 billion. This figure fell short of the $5.06 billion forecast. Same-store sales decreased by 4%, significantly worse than the anticipated 0.27% drop, resulting in a 7% plunge in Macy’s stock during premarket trading.
The company beat Wall Street’s adjusted earnings expectations by $0.24, reporting earnings per share of $0.53. Despite the earnings beat, CFO and COO Adrian Mitchell highlighted ongoing consumer pressure and the need for value-oriented offerings.
Strategic Focus Over Buyout Bid
This earnings report follows Macy’s decision to reject a $6.9 billion buyout offer from Arkhouse and Brigade Capital Management, which was publicly disclosed last December. Mitchell explained that the proposed offer of $24.80 per share was not compelling and that Macy’s management is now concentrating on its turnaround plan, “A Bold New Chapter.”
The rejected offer represented about a 60% premium over Macy’s share price on November 30, 2023. Macy’s management is optimistic that their new strategy, which includes significant real estate adjustments and store closures, will enhance the company’s value. The company has accelerated its plans, now targeting 150 store closures, up from the previously projected 50. They anticipate $115 million in asset sale gains this year, an increase from the original forecast of $90 million to $115 million.
Turnaround Strategy and Future Outlook
Macy’s CEO Tony Spring, who assumed the role in February, introduced “A Bold New Chapter” to enhance store performance and invest in digital sales. Initial results from 50 prioritized stores show a 0.8% increase in same-store sales, contrasting with declines in non-upgraded stores and those set for closure.
Analysts, including Morgan Stanley’s Alex Straton, predict that market confidence will improve as Macy’s turnaround plan progresses into mid-2025, following store closures and investments.
Shares of Macy’s have declined nearly 12% this year, while the S&P 500 (^GSPC) has risen by 17%. Macy’s Q2 results coincide with broader consumer fatigue over higher costs and a search for deals. Foot traffic in Macy’s stores has shown some improvement in July, likely driven by back-to-school shopping.
Performance and Forecast Adjustments
- Net Sales: $4.9 billion, versus estimates of $5.06 billion
- Adjusted EPS: $0.53, exceeding estimates of $0.29
- Same-Store Sales: Decreased by 4.0%, compared to an expected decline of 0.27%
- Licensed Stores: Sales down 3.6%, versus a forecasted increase of 0.63%
- Company-Owned Stores: Sales fell 4.5%, versus an expected decline of 1.04%
Macy’s has revised its full-year revenue outlook to between $22.1 billion and $22.4 billion, down from the previous range of $22.3 billion to $22.9 billion. Same-store sales are now expected to decrease by 2% to 5%, compared to the earlier forecast of a 1% gain to a 1.5% decline. Mitchell attributed the lowered outlook to the realization of second-quarter results and economic uncertainties affecting discretionary spending.
Featured Image: Megapixl
