FX.co ★ Macy's Q3 Results Top Estimates, But Slashes FY24 Adj. EPS Outlook

Macy's, Inc., an omni-channel fashion retailer, announced a dip in net profit for the third quarter on Wednesday, citing increased expenses and decreased revenues as primary factors. Despite these challenges, both adjusted earnings and quarterly net sales have surpassed the expectations set by analysts.

In spite of this positive news, pre-market trading has seen a sharp decline in Macy's stock, attributed to the company's reduction in its adjusted earnings forecast for the entirety of the 2024 fiscal year, even as it revises its annual net sales predictions upwards. Macy's shares on the NYSE are currently experiencing an 11.54% decrease, trading at $14.79.

Tony Spring, Chairman and CEO, stated, "Our third quarter results capture the encouraging momentum we're gaining through our Bold New Chapter strategy. Moreover, we are heartened by the consistent sales growth in our Macy's First 50 locations alongside the robust performance of Bloomingdale's and Bluemercury."

During the third quarter, Macy's reported a reduction in net income to $28 million or $0.10 per share, down from $41 million or $0.15 per share in the same period last year. When adjusted for special items, net income fell to $11 million or $0.04 per share, compared to $57 million or $0.21 per share a year ago.

The total revenue for the quarter decreased to $4.90 billion, compared to $5.04 billion in the previous year. Analysts surveyed by Thomson Reuters had anticipated earnings of $0.03 per share on net sales of $4.72 billion for this quarter, while typically excluding special items from their estimates.

Net sales fell by 2.4% to $4.74 billion from $4.86 billion last year. Comparable sales decreased by 2.4% on an owned basis and 1.3% on an owned-plus-licensed-plus-marketplace basis.

While there was sales growth at Macy's First 50 locations, Bloomingdale's, and Bluemercury, these were largely offset by weaker performance in non-First 50 locations, the digital channel, and cold weather categories. Macy's overall comparable sales fell by 2.0% on an owned basis and by 0.9% on an owned-plus-licensed-plus-marketplace basis.

Macy's brand net sales dropped by 3.1%, with owned comparable sales down 3.0% and owned-plus-licensed-plus-marketplace sales down 2.2%. In contrast, Bloomingdale's brand posted a 1.4% increase in net sales, with comparable sales up 1.0% on an owned basis and 3.2% on an owned-plus-licensed-plus-marketplace basis. Bluemercury also showed growth with a 3.2% increase in net sales, and comparable sales rising by 3.3% on an owned basis.

The gross margin rate decreased by 60 basis points to 39.6%, influenced by product mix changes and a conversion to cost accounting. Meanwhile, selling, general, and administrative expenses rose by 160 basis points to 42.1% of total revenue, primarily due to declining total revenues.

Looking forward to the 2024 fiscal year, Macy's projects adjusted earnings in the bracket of $2.25 to $2.50 per share, on net sales expected to fall between $22.3 billion and $22.5 billion, with comparable owned-plus-licensed-plus-marketplace sales changes anticipated to range from a decrease of about 1.0% to remaining flat.

Initially, the company estimated adjusted earnings between $2.55 and $2.90 per share, and after delivery expense adjustments, between $2.34 to $2.69 per share, with net sales forecasted between $22.1 billion and $22.4 billion, and comparable owned-plus-licensed-plus-marketplace sales changes expected between a decrease of 2.0% and a decrease of 0.5%. The market is currently aiming for earnings of $2.73 per share on net sales of $22.13 billion for the year.