Macy’s on Wednesday announced a downward revision to its annual sales forecast, acknowledging difficulties in attracting discerning shoppers and the need for more promotions.
Despite beating Wall Street expectations for earnings, the popular department store chain reported lower-than-expected revenue for the quarter.
The company now expects its net sales to be between $22.1 billion and $22.4 billion, down from the previously estimated range of $22.3 billion to $22.9 billion. This change also signals a potential year-over-year decline from the $23.09 billion reported in fiscal 2023.
Macy’s forecasts a decline in comparable sales, which measures performance excluding new or closed stores, forecasting a decline between 2% and 0.5%. This is a revision from previous expectations of a 1% decline to a 1.5% increase. This measure includes sales of both Macy’s own products and those of licensed brands, as well as sales generated through third-party online platforms.
In response to evolving market conditions in the consumer discretionary sector, Macy’s said the updated guidance allows the company greater flexibility to manage current uncertainties.
CEO Tony Spring commented on the shift in consumer behavior, noting a cautious approach to spending across the company’s brands, including upscale Bloomingdale’s. “There’s significant reluctance and procrastination in purchasing decisions, particularly for newer, more expensive items, even among affluent customers,” he said.
Spring also pointed to external distractions, such as fluctuating interest rates, unpredictable weather and a dynamic news cycle, that have impacted consumer spending patterns.
For the second fiscal quarter, Macy’s results were as follows, compared to Wall Street expectations as tracked by LSEG:
- Earnings per share: 53 cents adjusted, versus 30 cents expected.
- Revenue: $4.94 billion, below the $5.12 billion forecast.
Following these announcements, Macy’s shares fell nearly 13% at Wednesday’s close.
Macy’s is actively working to stabilize and drive growth across its operations. Earlier this year, Spring announced plans to close approximately 150 of its flagship stores by early 2027 and repurpose the remaining 350 locations. The strategy includes launching smaller Macy’s stores in suburban areas and expanding its successful brands, such as Bloomingdale’s and Bluemercury.
Despite these efforts, the latest quarterly data underscore the difficulties Macy’s faces in its recovery, with consumer preferences increasingly oriented towards essential purchases.
The company’s flagship brand saw a 3.6 percent decline in comparable sales, while Bloomingdale’s and Bluemercury saw a 1.4 percent decline and a 2 percent increase, respectively.
For the quarter ended Aug. 3, Macy’s reported net income of $150 million, or 53 cents a share, a sharp improvement from a loss reported in the same period a year earlier.
Notably, even excluding stores slated for closure, sales remained sluggish. Comparable sales for the operating Macy’s brand fell 3.3%.
Macy’s has made great strides in its remodeling, with the first 50 stores impacted by the investment reporting a 1% increase in comparable sales, marking the second consecutive quarter of positive performance.
Spring highlighted positive customer responses, particularly in areas such as women’s shoes and handbags, and emphasized plans to extend these successful strategies to additional stores in the coming quarter.
The company has also faced pressure from an activist group calling for privatization, a proposal that was rejected by Macy’s board of directors last month.
As of Wednesday’s close, Macy’s shares were at $15.45, giving the company a market cap of about $4.3 billion. The stock has fallen about 23% this year, lagging the S&P 500’s gains by more than 17%.
