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Macy’s Turnaround Shows Promise: First-Quarter Earnings Up 80% Over Expectations Despite 60% Net Income Drop

Macy's first-quarter earnings surpassed Wall Street expectations by 80%, with earnings per share hitting 27 cents compared to the expected 15 cents, despite a 60% decline in net income to $62 million. ]

21st May 2024


Macy's first-quarter earnings surpassed Wall Street expectations by 80%, with earnings per share hitting 27 cents compared to the expected 15 cents, despite a 60% decline in net income to $62 million.


Macy’s fiscal first-quarter earnings surpassed Wall Street's expectations. The retailer's revenue aligned closely with forecasts. 


This news signals early momentum in Macy’s turnaround strategy. Here's an in-depth look at Macy’s latest financial performance and strategic shifts.


Financial Highlights


Macy’s reported earnings per share of 27 cents, beating the expected 15 cents. Revenue for the quarter reached $4.85 billion, just shy of the $4.86 billion forecasted. 


Net income dropped significantly by 60%, to $62 million from $155 million in the same quarter last year. This decline translates to 22 cents per share, down from 56 cents per share.


Net sales also declined, falling from $4.98 billion in the previous year’s period. Despite these drops, earnings beat and steady revenue indicate positive early signs of turnaround efforts.


Raised Full-Year Expectations


Following the first-quarter results, Macy’s adjusted its full-year earnings expectations. 


The company now anticipates net sales between $22.3 billion and $22.9 billion, down from $23.09 billion in 2023. 


Comparable sales are expected to range from a decline of 1% to a gain of 1.5%. This is an improvement from the previous projection, which anticipated a decline of up to 1.5%.


Macy’s also raised its adjusted earnings per share outlook to between $2.55 and $2.90, up from the earlier range of $2.45 to $2.85. These revised figures reflect confidence in the ongoing turnaround strategy.


Turnaround Strategy in Action


Macy’s CEO Tony Spring highlighted the company's progress in the turnaround plan during an earnings call. Investments have been made in 50 Macy’s stores, enhancing customer experiences.


Changes include more sales associates in key departments and introducing new brands like Donna Karan, French Connection, and Hugo Boss.


Efforts to boost foot traffic and sales include personal styling sessions, fashion shows, and unique services like fragrance bottle engraving. 


These initiatives aim to attract customers and increase purchases during visits. Spring emphasized the need for more variety and less redundancy in the product assortment to enhance customer reception.


Store Performance and Investments


Macy’s is strategically reducing its store footprint while investing in high-performing locations. 


The company plans to close about 150 underperforming stores by early 2027, focusing on approximately 350 stores that show better performance. 


These stores saw a modest increase in comparable sales by 0.1% on an owned-plus-licensed basis.


In the first 50 stores that received additional investment, comparable sales rose by 3.4%. This performance boost underscores the effectiveness of Macy’s targeted investments in specific locations.


Bloomingdale’s and Bluemercury Outperform


Macy’s owns Bloomingdale’s and Bluemercury, which have performed better than the Macy’s brand itself. 


Bluemercury saw a 4.3% rise in comparable sales, while Bloomingdale’s experienced a 0.3% increase. These figures are on an owned-plus-licensed basis, including third-party marketplace sales.

 

Macy’s, in contrast, reported a slight decline in comparable sales by 0.4%. The 150 underperforming Macy’s stores were a drag on overall results. However, the investment in high-performing stores is part of a broader strategy to enhance profitability.

 

Consumer Outlook and Strategy


CFO and COO Adrian Mitchell mentioned that Macy’s expects consumers to remain under financial pressure throughout the year. 


Despite this, the company is optimistic about its turnaround strategy’s impact on both online and in-store sales.

 

Macy’s is targeting millennial and Gen Z shoppers by launching exclusive brands and revamping existing ones. 


These efforts aim to attract a younger demographic and increase customer loyalty. The company is also enhancing its digital presence to complement its physical stores.

 

Challenges and Opportunities


Macy’s faces a potential takeover bid from activist investors Arkhouse Management and Brigade Capital. 


These investors have proposed taking Macy’s private and waged a proxy battle. The conflict was settled in April when Macy’s agreed to add two new board members.

 

Despite these challenges, Macy’s stock has seen a slight decline this year. Shares closed at $19.10 on Monday, giving the company a market value of $5.26 billion. The stock has fallen about 5% year-to-date, compared to an 11% gain for the S&P 500 in the same period.

 

Expansion and Customer Engagement



Macy’s plans to continue its store optimization strategy. This includes expanding Bloomingdale’s and Bluemercury, which have shown resilience in a challenging retail environment. 


The smaller Macy’s stores in suburban areas aim to capture more localized market demand.

 

The retailer is also focused on enhancing customer engagement. By offering unique in-store experiences and a diverse product range, Macy’s hopes to increase foot traffic and sales. Personalized services and exclusive events are key components of this strategy.

 

Technological Investments


Macy’s is investing in technology to improve customer experience and operational efficiency. This includes upgrading point-of-sale systems and enhancing online shopping platforms. 


The goal is to provide a seamless shopping experience across all channels.

 

For example, Macy’s has introduced virtual shopping assistants and improved its mobile app. These technological advancements aim to make shopping more convenient and personalized. 


The company is also using data analytics to better understand customer preferences and trends.