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Macy’s beats modest Q1 estimates as it weighs future between turnaround and acquisition
Macy’s (M) beat weak Q1 expectations as a takeover bid remains on the back burner.
As of Tuesday morning, the department store chain reported revenue of $4.85 billion, down 2.7% from last year and slightly above Wall Street estimates of $4.81. billion. Its adjusted earnings per share of $0.27 also beat the $0.14 expected.
Same-store sales fell 1.2%, less than the 2.78% decline predicted by Wall Street.
“While it’s still early days, our investments in product, presentation and experience are gaining momentum and reinforcing our belief that, over the long term, Macy’s, Inc. can return to sustainable, profitable growth,” said CEO Tony Spring.
This is the first quarterly report since Spring, who took the helm earlier this year, launched the “A Bold New Chapter” initiative. The overall strategy includes plans to close 150 underperforming stores, improve remaining stores and product assortment, and invest in digital sales.
In the quarter, the other focus stores had same-store sales growth of 0.1%, compared to a 4.5% drop in closed stores.
In the Q1 release, Spring said the team is “encouraged” by the response from customers, “resulting in sales near the high end of our outlook.”
The company now expects to end 2024 with net revenue in the upper lower bound of $22.3 billion to $22.9 billion. Same-store sales are expected to be between a 1.0% year-over-year decline and a 1.5% increase. This compares to the previous expectation of a decline of around 1.5% to an increase of 1.5%.
Adjusted earnings also got a boost, expected to end the year in the range of $2.55 to $2.90, compared to $2.45 to $2.85 in previous guidance.
Guests attend the 2024 Macy’s Flower Show at Macys Herald Square on March 24, 2024 in New York City. (Noam Galai/Getty Images for Macy’s, Inc.) (Noam Galai via Getty Images)
Wall Street remains skeptical about the company’s future.
Ahead of the report, UBS analyst Jay Sole said the new initiatives were “unlikely” to make a difference.
In a note to clients, Sole wrote: “These initiatives are not part of our base case. However, they are part of our positive case.” He identified the three key areas as “Macy’s Backstage, Macy’s small store initiative and its omnichannel service improvements, both online and in-store.”
Since 2012, Macy’s has lost 25% of its market share “primarily to off-price retailers, brands and Amazon,” according to Sole.
CFRA analyst Zachary Warring expects sales to continue falling, “with a single-digit decline over the next five years,” he wrote in a client note.
It’s unclear whether the company will provide updates on Arkhouse Management and its partner Brigade’s $6.6 billion bid to take the department network private. In mid-March, they both said on a SEC Filing that they were working on a confidentiality agreement with Macy’s that would allow buyers to perform financial due diligence.
The story continues
As of market close on Monday, Macy’s had a market value of about $5.3 billion.
The Earnings Summary
Here’s what Wall Street expects from Macy’s, according to Bloomberg data, compared to Q1 2023 results:
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Liquid sales: US$4.85 billion versus US$4.81 billion
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Adjusted EPS: $0.27 vs. $0.14 in comparison
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Same-store sales: -1.2% versus -2.78%
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Gross margin: 39.2% versus 39.63%
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Adjusted net profit: US$77 million against US$39.6 million
Other areas of note include its two subsidiaries, Bloomingdale’s and Bluemercury, which reported same-store sales growth, up 0.8% and 4.3%, respectively.
The company’s credit card revenue fell $45 million to $117 million, which the company alluded to “the impact of expected higher delinquency rates and net portfolio credit losses.”
Its advertising business, Macy’s Media Network, saw revenue jump from $8 million to $37 million due to “increased vendor engagement.” Merchandise inventory is also 1.7% higher than last year.
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Brooke DiPalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DiPalma or send an email to bdipalma@yahoofinance.com.
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