Macy’s Q4 better than expected; expects spending to remain under pressure
Macy’s reported fourth-quarter profit and sales declines but still beat Wall Street estimates.
In the coming year, CEO Jeff Gennette said Macy’s will focus on updating its private brands and off-mall expansion, growing its online marketplace, and luxury brands.
[Read More: Macy’s enters marketplace competition with Amazon, Walmart, eBay]
Macy's smaller, off-mall locations include Market by Macy's and Bloomie's. To date, the retailer has opened four Market outposts and two Bloomie's locations.
On the company's earnings call with investors, Gennette said Macy's plans on opening four Market by Macy’s stores and one Bloomie's this year, "and if these new locations continue to outperform, we will look to incrementally accelerate off-mall openings beginning in 2024."
He also said that Macy’s expects discretionary spending to remain under pressure as consumers continue to shift towards services and essential goods.
The department store retailer reported net income of $508 million, or $1.83 a share, for the quarter ended Jan. 28, down from $742 million, or $2.44 a share, in the year-ago period. Adjusted earnings per share came to $1.88, easily topping the $1.58 analysts had expected.
Sales fell to $8.264 billion from $8.665 billion, ahead of the $8.234 billion analysts expected. Same-store sales at owned stores fell 3.3% and were down 2.7% at owned plus licensed stores, but rose 3.1% and 3.3% respectively versus 2019.
Sales were driven by strength in gifting and other special occasion categories, including beauty, men’s tailored apparel, dresses and shoes, while sales in active, casual and soft home declined. The categories that declined were much in demand during the peak pandemic period, when many people were working from home full time.
By banner, Bluemercury and Bloomindale’s turned in the strongest fourth-quarter performances. Bluemercury’s comparable sales were up 7.2% on an owned basis. Results were driven by strength in skincare and color, strategic partnerships and a new initiative The Cache, an incubator platform that curates emerging, and cutting-edge brands.
Bloomingdale’s comparable sales were up 1.2% on an owned basis and up 0.6% on an owned-plus-licensed basis. Beauty, women’s and men’s apparel in both contemporary and dressy performed well, and were partially offset by weakness in handbags and textiles.
Macy’s comparable sales were down 3.9% on an owned basis and down 3.3% on an owned-plus-licensed basis. Top-performing categories included beauty, men’s tailored apparel, dresses and shoes. Sales in active, casual and soft home declined versus the prior year.
“In the fourth quarter, we benefited from our disciplined inventory approach and compelling gift-giving strategy, which allowed us to provide fresh fashion and style at great values for all our customers,” said Gennette. “We were competitive but measured in our promotions, took strategic markdowns and intentionally did not chase unprofitable sales.”
For the full year, Macy’s had net sales of $24.4 billion, down 0.1% from the previous year. Brick-and-mortar sales increased 3% versus 2021, while digital sales were down 6%.
Gennette said that Macy's successfully navigated 2022 from a position of financial and operational strength. At the end of the fourth quarter, Macy’s inventory was down about 3% versus the year-ago period and down about 18% compared with 2019.
“Despite an increasingly volatile macroeconomic climate … we remained agile, pivoted to meet customer demand and elevated our approach to inventory management," Gennette said.
For its current fiscal year, Macy’s expects net sales to decline in a range of 1% to 3% compared with 2022, or between $23.7 billion and $24.2 billion. Earnings per share are expected to range from $3.67 to $4.11.