Macy’s (M) beat muted Q1 expectations, as a buyout bid lingers in the background.
On Tuesday morning, the department store chain reported revenue of $4.85 billion, down 2.7% compared to last year, and slightly higher than Wall Streets’ estimates of $4.81 billion. Its adjusted earnings per share of $0.27 also topped the $0.14 expected.
Same-store sales fell 1.2%, less than the 2.78% decline Wall Street predicted.
“Although early days, our investments in product, presentation and experience are gaining traction and reinforce our belief that longer-term, Macy’s, Inc. can return to sustainable, profitable growth,” said CEO Tony Spring.
This is the first quarterly report since Spring, who took the helm earlier this year, rolled out “A Bold New Chapter” initiative. The overall strategy includes plans to close 150 underperforming stores, improving the remaining stores and product assortment, and investing in digital sales.
In the quarter, the remaining focus stores saw same stores sales growth of 0.1%, compared to the 4.5% drop at the closing locations.
In the Q1 release, Spring said the team is “encouraged” by customers’ response, “resulting in sales near the high end of our outlook.”
The company now expects to end 2024 with net revenue in a higher lower end of $22.3 billion to $22.9 billion. Same store sales are expected to come in between a 1.0% year over year drop to a 1.5% increase. That’s compared to the previous expectation of a roughly 1.5% drop to a 1.5% increase.
Adjusted earnings also got a boost, expected to end the year in a range of $2.55 to $2.90, compared to the $2.45 to $2.85 in the previous guidance.
Wall Street remains skeptical of the company’s future.
Prior to the report, UBS analyst Jay Sole said it is “unlikely” that the new initiatives will make a difference.
In a note to clients, Sole wrote, “These initiatives are not part of our base case. However, they are part of our upside scenario.” He identified the three key areas as “Macy’s Backstage, Macy’s small store initiative, and its omni-channel service improvements, both online and in-store.”
Since 2012, Macy’s has lost 25% of its market share “primarily to Off-Price retailers, brands, and Amazon,” per Sole.
CFRA analyst Zachary Warring expects sales to keep dropping, “with a low-single-digit decline over the next five years,” he wrote in a client note.
It’s unclear if the company will be providing any updates about Arkhouse Management and its partner Brigade’s $6.6 billion offer to take the department chain private. In mid-March, both said in an SEC filing that they were working on a confidentiality agreement with Macy’s that would allow the buyers to conduct financial due diligence.
As of market close on Monday, Macy’s has a market cap of roughly $5.3 billion.
The earnings rundown
Here’s what Wall Street expects from Macy’s, according to Bloomberg data, compared to Q1 2023 results:
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Net sales: $4.85 billion versus $4.81 billion
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Adjusted EPS: $0.27 versus $0.14 compared
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Same-store sales: -1.2% versus -2.78%
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Gross margin: 39.2% versus 39.63%
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Adjusted net income: $77 million versus $39.6 million
Other areas worth of note include its two subsidiaries, Bloomingdale’s and Bluemercury, which both saw same store sales growth, up 0.8% and 4.3%, respectively.
The company’s credit card revenue dropped $45 million to $117 million, which the company alluded to “impact of expected higher delinquency rates and net credit losses within the portfolio.”
Its ad business, Macy’s Media Network, saw revenue jump $8 million to $37 million, from “increased vendor engagement.” Merchandise inventory is also 1.7% higher than last year.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
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