Yahoo Finance Macy’s Inc. Posts Q1 Sales and Profit Declines but Cites Early Success in Strategic Maneuvers
Updated May 21 at 4:13 p.m. EST
Macy’s Inc., impacted by consumers pressured by inflation and the rabid promotional retail landscape, saw bottom-line and sales revenues declines in the first quarter.
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But the company said initial investments in its “go-forward” stores show early signs of paying off.
Net income for the quarter ended May 4 came to $62 million, compared with $155 million in the year-ago quarter. Operating income came to $125 million versus $244 million in last year’s quarter.
Net sales of $4.85 billion were down 2.7 percent from $4.98 billion. Comparable sales were down 1.2 percent on an owned basis and down 0.3 percent on an owned-plus-licensed-plus-marketplace basis.
“The consumer continues to be resilient despite inflation barely subsiding. They feel the pinch. They are carefully scrutinizing their purchases,” Tony Spring, Macy’s Inc. chairman and chief executive officer, told WWD.
“We know we have to have the right assortments at the right place and the right time to capture share of wallet and market,” Spring said. “Overall, the consumer is concerned, but if you’ve got the right ideas and right products, you are going to do business. Our business is driven by newness, leaning into trends, making sure we have the right staffing in our stores, and refreshing our marketing and promotional strategy. If you are not doing something special and something different, you don’t get the response. That is what we are acknowledging.”
Sales in women’s and men’s apparel were soft in the first quarter, with spring fashions not selling as well as expected and big ticket and home areas “still challenging,” the company indicated.
On the other hand, women’s shoes, fine jewelry and fragrances had standout performances.
By division in the first quarter, Bloomingdale’s saw a 0.3 percent comparable sales gain; Bluemercury saw a 4.3 percent comparable sales increase, and Macy’s comp sales were down 0.4 percent.
However, the results beat internal expectations and those of Wall Street, which on Tuesday pushed Macy’s stock price up 5.2 percent to $20.10.
Macy’s raised its earnings per share guidance for the year to $2.55 to $2.90, up from previous guidance of $2.45 to $2.85. The forecast for sales was narrowed slightly, to between sales of $22.3 billion and $22.9 billion for this year, compared with previous guidance of $22.2 billion to $22.9 billion.
In addition, Macy’s indicated that in 50 stores where it is piloting staff changes, merchandise upgrades and more animated visuals, there was a 3.4 percent comp sales gain and a 500 basis point improvement in the net promoter score, which is a gauge of consumer satisfaction. The 350 Macy’s “go-forward” locations saw a 0.1 percent comparable sales gain.
In February, Macy’s revealed its “Bold New Chapter” strategy, which involves closing approximately 150 Macy’s department stores through 2026 including about 50 this year and devoting more resources to the 350 better-performing doors that are slated to stay open. The strategy also calls for larger investments in luxury and further expansion of the small-format brick-and-mortar chains — Bloomie’s, the specialized and downsized Macy’s units, and Bloomingdale’s outlets and Backstage off-price units.
Spring expects consumers to remain under pressure through 2024, but withheld opining on 2025. Still, he was satisfied with the first-quarter outcome, and said he expects Macy’s to continue executing better. With that, he said the company should return to low-single-digit sales growth and a midsingle-digit profit margin next year. “It’s not because the environment gets better. I don’t want to assume that’s going to happen,” Spring said.
The 50 Macy’s stores getting special attention are adding and eliminating certain brands, augmenting others, improving the visual merchandising and upping the event programming, such as with more fashion shows, and “things that were more a part of retail at one point.…We also want to make sure we have more staffing. We heard from customers that there was not staffing, for example, in the shoe department, in fitting room areas.”
The 50 stores are “a good geographic representation of the fleet and not just top-performing stores or stores in New York or Los Angeles,” Spring said. Stores in Florida, Virginia and other states are included, he said. Among the 50 are those in the Garden State Plaza in Paramus, N.J., the Cross County shopping center in Yonkers, N.Y., and in Oakbrook, Ill.
For the past few years, Macy’s has been reimagining its private brand portfolio by adding and eliminating certain labels, and revamping others. Macy’s will launch an in-house men’s contemporary brand later this year, and is refreshing two children’s private brands, Epic Threads and First Impressions.
“We are building a more modern and relevant private brand portfolio,” by rethinking pricing, the balance fashion versus basics per label, and determining if the brand should focus on men’s or women’s or both. “How is it positioned against a market brand? How does it fill a white space. Every one of the brands has to have a reason to be,” Spring said.
Among the changes, INC menswear, Alfani women’s and Karen Scott were dropped, and On 34th and State of Day were launched. Next year, the private brand home assortment will get overhauled, Spring said, with Macy’s upscale and successful Hotel brand undergoing some changes next year. “Hotel is missing some sisters and cousins,” meaning there’s room for growth, Spring said.
Macy’s Inc.’s fledgling digital marketplaces for Macy’s and Bloomingdale’s are “doing well. We are pleased with the performance at both,” Spring said. “We will launch more electronics for Father’s Day and the graduation season; electronics will be even bigger during holiday.…We will lean into hair care, outdoor home furnishings and kids furniture. We don’t want to play in categories customers don’t think of us for.”
During the quarter, a 31,000-square-foot Macy’s opened in Mount Laurel, N.J. And Spring said Macy’s is on track to introduce 11 more Macy’s small format stores this year, bringing the total to 24.
Bloomingdale’s has three Bloomie’s specialized stores operating. The division is on-track to open a total of 15 new Bloomie’s and Bloomingdale’s the Outlet locations through fiscal 2026. Spring did not specify how many of the 15 would be Bloomie’s or Bloomingdale’s Outlets. Currently, there are 21 Bloomingdale’s outlets.
At Bluemercury, plans are to open at least 30 sites and remodel about 30 others.
In April, Macy’s Inc. appointed two independent directors, Richard Clark and Richard L. Markee, ending a proxy fight over control of the retailer’s board with activist investor Arkhouse Management.
In turn, Arkhouse withdrew its push to remake the company’s board in more dramatic fashion with nine director nominees. Clark and Markee were among the nine who had been nominated by Arkhouse for the board. While the two sides have settled on the board composition, Arkhouse, along with Brigade Capital Management, is still pursuing a takeover of Macy’s. They proposed buying Macy’s Inc. for $24 a share, or $6.6 billion. Macy’s rejected an earlier bid from Arkhouse and Brigade valuing the company at $21 a share, or $5.8 billion.
Asked about the situation with the activists, Spring replied, “There is nothing further to say or report.” Macy’s did invite Arkhouse and Brigade to conduct a due diligence. “The board remains open to what’s in the best interest of our shareholders,” Spring said.
In other results:
Credit card revenues declined by $45 million to $117 million. The decline was attributable to the impact of expected higher delinquency rates and net credit losses within the portfolio.
Merchandise inventories were up 1.7 percent. “Entering the second quarter of 2024, end-of-quarter inventories are well-positioned for the upcoming summer season,” Macy’s stated.
Gross margin rate for the quarter was 39.2 percent, down from 40 percent in the first quarter of 2023.
Merchandise margin declined 100 basis points, primarily reflecting additional discounting for slower-moving warm weather products.
Macy’s Media Network revenue rose $8 million to $37 million from increased vendor engagement.
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