Macy’s (M) Reports Second Quarter Fiscal 2022 Results

Macy’s On Tuesday, he cut his full-year forecast, saying he expected consumer spending on discretionary items like clothing to deteriorate, which would force the department store chain to use heavy markdowns to pull the items off the shelves. shelves.

The warning comes even as the retailer reported second-quarter profit and revenue which exceeded analysts’ expectations. Macy’s also teased that its digital marketplace, which was announced last yearis launched in the coming weeks.

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Macy’s now expects revenue for fiscal year 2022 to be in the range of $24.34 billion to $24.58 billion, down from previous estimates of $24.46 billion to $24.7 billion. It puts its annual adjusted earnings per share in the range of $4 to $4.20, down from earlier guidance of $4.53 to $4.95. Wall Street analysts were looking for a full-year forecast of $24.36 billion and $4.51 per share, according to consensus estimates from Refinitiv.

Macy’s Revised Forecast Tracks Big Box Giants walmart and Target last week, both reiterating their full-year guidance even as earnings come under pressure. Kohlshowever, cut its forecast again saying its middle-income customers are being hurt by inflation.

Businesses that rely on sales of discretionary items like apparel and footwear are at greater risk of underperforming in an environment where shoppers are increasingly considering cutting spending. During the summer in particular, many Americans have chosen to splurge on vacations and restaurants rather than physical possessions.

“The consumer is not as healthy as in previous quarters,” Chief Financial Officer Adrian Mitchell told analysts on a conference call. “We saw lower retail traffic in areas where apparel sales are weakening during the quarter as the consumer faces higher costs for essential goods, particularly groceries.”

Macy’s noted that its Bloomingdale’s and Bluemercury banners captured demand in the past quarter from high-income customers spending on luxury items. Both companies outperformed, he said.

The department store chain also said that while lower-income consumers slowed their spending in the quarter, they didn’t necessarily opt for cheaper brands. Instead, they’re just more selective, according to Gennette.

Here’s how Macy’s fared in its fiscal second quarter compared to what analysts were expecting, based on Refinitiv estimates:

  • Earnings per share: $1 adjusted vs. 85 cents expected
  • Revenue: $5.6 billion vs $5.49 billion expected

Net income in the three months ended July 30 fell to $275 million, or 99 cents per share, from $345 million, or $1.08 per share, a year earlier.

Net sales fell slightly to $5.6 billion from $5.65 billion a year earlier.

Macy’s comparable sales on a more licensed owned basis fell 1.6% from a year earlier. Analysts were expecting a 2% decline, according to Refinitiv.

Digital sales fell 5% from a year earlier but were still up 37% from pre-pandemic levels, Macy’s said. E-commerce revenue accounted for 30% of total sales, down slightly from a year earlier as people returned to stores to shop.

CEO Jeff Gennette said Macy’s so-called Polaris turnaround plans, which have resulted in store closures and investments in its digital operations, have made the company faster and more agile. This has been “essential in navigating rapidly changing consumer trends and macro conditions,” he said in a press release.

As Macy’s reduces its exposure to brick-and-mortar malls, the company opens smaller stores in non-mall locations. It is also testing other ways to attract shoppers to its stores, including a partnership with the owner of Toys R Us to bring an assortment of toys and games to hundreds of Macy’s locations before the holidays.

Gennette said he expects shoppers to start shopping for Christmas gifts, decorations and other items as early as October, similar to 2020 and 2021.

Yet Macy’s cannot escape changing consumer behavior amid decades of high inflation.

Spending trends fell as June progressed, Gennette said on a conference call. After Father’s Day and into July, Macy’s year-over-year sales were down about five percentage points from previous weeks, he said.

Macy’s reported second-quarter inventory levels up 7% from year-ago levels. The department store chain said it was aiming for “appropriate” inventory levels by the end of the year.

It said it was using markdowns to eliminate aged inventory of seasonal products, private label merchandise and pandemic-related categories like activewear, sleepwear and home goods.

At the same time, Macy’s said it will invest in bringing in new inventory of the categories its customers seek out during the holiday season.

During its second quarter, Macy’s reported strength in women’s dresses and workwear, men’s tailored activewear, fragrances and luggage.

“The past two years have been good for Macy’s and the business is now in better shape than it was before the pandemic,” said Neil Saunders, managing director of GlobalData Retail. “However, unless the company capitalizes on this fortune to make major changes, it will continue to lag the overall market.”

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