Macy’s sales fall short in tough Q1; cuts outlook
Macy’s reported worse-than-expected first-quarter sales and reduced its outlook amid a slowdown in consumer spending that picked up more steam in the early spring.
“We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories,” stated CEO Jeff Gennette in the earnings release.
On the company's earnings call, Gennette said that sell-throughs were below expectations "as our customer became increasingly more deliberate in how they are allocating discretionary spend and buying closer to need."
Macy's also moved too quickly to move spring and summer clothing into its stores, leaving it without enough warm or season-less apparel just as much of the country was experiencing colder-than-normal weather, Gennette said.
On the call, Gennette also told analysts that Nike apparel and accessory products will return to Macy’s stores and websites in October. Nike had started to wind down its apparel partnership with Macy’s at the end of 2021.
We’re committing to a long term partnership together,” Gennette said. “It’s one of the most important brands for our customer. We had lots of customers that were disappointed that we didn’t carry it over the past year.”
“This is a win for us," Gennette added. "And we think it’s a win for Nike.”
The department store giant said it has moved to meet weakened demand and manage costs. It is expecting $200 million of incremental cost savings to be realized in fiscal 2023.
Macy’s net income totaled $155 million, or $0.56 per share, for the quarter ended April 29, compared with $286 million, or $0.98 cents per share, for the year-ago period. Adjusted earnings of $0. 56 a share beat analysts’ expectations of $0.45 a share.
Net sales fell roughly 7% to $4.982 billion from $5.348 billion, missing estimates of $5.014 billion. Brick-and-mortar sales decreased 6% versus the first quarter of 2022, while digital sales fell 8%.
Comparable sales on an owned-plus-licensed basis fell 7.2%. By banner, comp sales at Macy’s declined 7.9% on an owned-plus-licensed basis, and were down 4.3% at Bloomingdale’s. Comp sales at Bluemercury increased 4.3%.
Merchandise inventories were down 7% year-over-year and down 16% to 2019, reflecting ongoing disciplined inventory management, the company said. The retailer added that it is taking pricing actions in the second quarter to sell through remaining first-quarter seasonal merchandise inventories and May receipts at the Macy’s nameplate. It anticipates end of second-quarter merchandise inventories to be down low to mid-single digits compared to last year on a percentage basis.
Macy’s lowered its full-year guidance, citing “anticipated macroeconomic impacts to the consumer.”
“We have moved quickly to take the appropriate actions to meet current consumer demand and manage our expenses,” Gennette stated. “Our revised guidance reflects incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year.”
The retailer now expects full-year sales to range from $22.8 billion to $23.2 billion, down from its prior guidance of $23.7 billion to $24.2 billion. It expects adjusted earnings per share to range from $2.70 to $3.20, down from prior guidance of $3.67 to $4.11.
Same-store sales are expected to fall 6% to 7.5% down from its previous guidance of a decrease of 2% to 4%.