Macy’s swings to a profit amid sales drop
Macy’s ended its second quarter on an upbeat note, despite navigating a highly promotional landscape and fickle shoppers.
Crediting its turnaround strategy revealed in February, Macy’s reported a profit of $150 million for the second quarter ended August 3. This marks a huge rebound from a loss of $22 million in the same period a year ago.
Conversely, net sales fell 3.8% to $4.94 billion. Despite slipping from $5.13 billion a year ago, sales only slightly missed analyst expectations of $5.06 billion. Same-store sales also took a hit, dropping 3.3%.
“During the second quarter, we delivered strong earnings performance in a challenging consumer environment,” Tony Spring, chairman and chief executive officer of Macy’s, Inc. said in a statement. (Spring joined the department store giant in February.) “Our colleagues executed with discipline, supporting gross margin expansion and effective expense control throughout the organization.”
Spring is also bullish about future gains due to early positive signs related to Macy’s "Bold New Chapter Strategy."
This new initiative, also announced in February, involves closing approximately 150 underproductive Macy’s locations, including some 50 by the end of 2024, and prioritizing investment in approximately 350 “go-forward” nameplate locations and the continued expansion of small-format stores. In October, Macy’s said it would open up to 30 small-format, off-mall stores through fall 2025, starting in fall 2024.
The company also plans to focus more on luxury goods by opening about 15 Bloomingdale’s stores and at least 30 Bluemercury stores during the next three years. It also expects to remodel about 30 Bluemercury locations during that time. Bloomingdale's and Bluemercury have both outperformed Macy's.
“We are seeing signs of our strategy taking root, including two consecutive quarters of positive comparable sales in Macy’s First 50 locations,” Spring said. “We are encouraged by the early traction of our Bold New Chapter and remain committed to returning Macy’s, Inc. to sustainable profitable growth.”
Taking the challenges caused by more discriminating consumers and heightened promotional environment into account, Macy’s updated its annual outlook to fall between $22.1 billion and $22.4 billion compared its previous guideline of $22.3 billion to $22.9 billion. The department store giant also lowered its comparable sales projection to between 2% and 0.5% versus its previous estimate of 1% to 1.5%.
Macy’s currently operates 720 stores under the banners Macy’s, Bloomingdales and Bluemercury banners.
