Macy’s
stock was falling Thursday after the retailer cut its full year guidance “to reflect anticipated macroeconomic impacts to the consumer.”
Macy’s
(ticker: M) lowered its 2023 earnings outlook to be between $2.70 a share to $3.20 a share. The company previously anticipated earnings-per-share to be between $3.67 and $4.11. Analysts surveyed by FactSet were anticipating 2023 earnings to be $3.69 a share.
Macy’s
also lowered its sales guidance for the year—2023 revenue is now expected to be between $22.8 billion and $23.2 billion, down from previous guidance of between $23.7 billion to $24.2 billion. Analysts were expecting 2023 revenue to be $23.7 billion.
The company expects a gross margin rate of between 38% and 38.5%, which reflects clearance markdowns to address excess spring seasonal merchandise in the second quarter that was brought in too early in the year, said Chief Executive Jeff Gennette. First-quarter gross margin was 40%, up 0.4 percentage points year-over-year.
Outside of the discounts for the spring collection, the company didn’t see “a lot of surprises” in terms of demand for its other products, management said. Macy’s continues to lean on products that are performing well, including beauty, gifting, and sportswear, and reducing emphasis on weaker categories.
“While we recognize the macro economic climate has created a larger headwind on our business than originally anticipated when we first introduced our annual outlook in early March, we are responding and remaining agile to ensure we meet the needs of our customers,” said Adrian Mitchell, chief financial officer. Mitchell will soon transition into the role of chief operating officer, the company said earlier this year.
The guidance also incorporates a higher estimate for inventory shrink, an industry term that refers to lost inventory which includes theft.
Given softer demand for discretionary goods, the company is cutting costs. Macy’s has identified an additional $200 million of cost savings for this year and roughly $300 million to $350 million of savings for 2024.
Macy’s posted earnings of 56 cents a share on revenue of $5 billion for the first quarter, down 7% year-over-year. Analysts expected earnings of 45 cents a share on revenue of $5.01 billion.
The call marked the first time in which incoming CEO Tony Spring addressed investors as part of his new role. Spring reaffirmed his commitment to bring the company back to profitable revenue growth in 2024, as well as to the company’s efforts to modernize the business. That includes Macy’s private label strategy, third-party online marketplace, and plans to open more small-format stores.
Shares of Macy’s tumbled as much as 10% in premarket trading following the release, but were down just 3.6% to $13.10 following the company’s earnings call.
“Macy’s significant earnings guidance reduction underscores the challenges facing retailers given a softening consumer spending environment and shifts in budgets toward services,” said David Silverman, senior director at Fitch Ratings. Still, Silverman said the company is well positioned to maintain market share given its recent initiatives to improve its real estate portfolio and invest in online shopping.
The stock is down more than 30% this year, underperforming the S&P 500’s 8.9% gain as well as some of its department store peers.
Kohl’s
(KSS) is down 27%, while
Nordstrom
(JWN) is down 5.2%.
Write to Angela Palumbo at [email protected]
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