Macy’s got dinged by macroeconomic and retail trends in the second quarter even as it topped Wall Street estimates, and now it is working to position itself for a strong holiday season.
Macy’s net income in the quarter was $275 million, or 99 cents per diluted share, versus $345 million, or $1.08 per diluted share, in the period a year before. Adjusted net income was $277 million, or $1 per diluted share, versus $411 million, or $1.29 per diluted share, in the quarter a year previous, the company stated.
Macy’s adjusted diluted earnings per share total in the quarter beat a Yahoo Finance-published analyst consensus estimate of 85 cents. The company also beat an analyst consensus revenue estimate of $5.49 billion.
Comparable sales slipped 1.5% on an owned basis and 1.6% on an owned-plus-licensed basis. Macy’s pointed out that comps were up 4.3% and 4.4%, respectively, versus the 2019 second quarter. Digital sales fell 5% year-over-year in the quarter while advancing 37% versus the 2019 period.
Macy’s banner comps decreased 2.9% on an owned basis and 2.8%, on an owned-plus-licensed basis in the quarter year over year, the company reported. Merchandise categories that demonstrated strength in the quarter included occasion-based segments such as career and tailored sportswear, fragrances, shoes, dresses and luggage.
At Bloomingdale’s, comps increased 8.8% on an owned basis and 5.8% on an owned-plus-licensed basis in the quarter year over year. Merchandise categories that demonstrated particular strength in the quarter were women’s, men’s and kid’s contemporary, dressy apparel, and luggage.
Bluemercury comps increased 7.6% on an owned and owned-plus-licensed basis.
Macy’s posted net sales of $5.6 billion versus $5.65 billion in the year-past quarter. Operating income was $399 million versus $597 million in the 2021 period.
In a conference call, Jeff Gennette, Macy’s chairman and CEO, said inflation and the macroeconomic environment in general as well as a shift toward travel and related services spending had cut into shopper purchasing at Macy’s. He also said that a return to more store shopping hit digital sales. However, he said occasion spending, whether for travel-related goods or holidays including Father’s Day and Mother’s Day, had been solid.
Gennette said Macy’s dealt with supply chain and inventory levels relatively well. Still, he said, Macy’s had to slow receipts in designated categories where slower and shifting consumer spending had generated excess inventory, focusing on market branded goods “where we have more flexibility than [with] our private brands.”
He indicated that excess inventory across retail and the promotional environment resulting factored into Macy’s decision to slow certain receipts as it positioned itself for the holidays and to bring down inventory to normal levels by year’s end. As such, Macy’s will take markdowns where necessary including ing some product segments that got a particular lift in the COVID-19 pandemic.
“We’re making strategic decisions to fuel the second half of the year, particularly by rebalancing our mix of market and private brands to ensure that we have the products our consumers expect to see over the holidays,” Gennette said, adding, that “more than 55% of our offerings during holiday 2022 will be new, an increase of over 30 percentage points from holiday 2019, and we believe we will position well to meet customer expectations. Yet, we see risk in the continued deterioration of the consumer’s discretionary spending in some of our categories and the industry-wide glut of pandemic-related category inventory.”
In announcing the financial results, Gennette said, “During the second quarter, we delivered solid results, despite the challenging environment. Our teams have consistently responded to the dynamic landscape with disciplined, data-driven actions to ensure the health and stability of our business. We believe that we are well positioned to respond to changing consumer behaviors. Despite inflationary pressures, consumers continued to shop Macy’s as a style source and leading gifting destination. Additionally, Bloomingdale’s and Bluemercury captured demand for luxury brands, resulting in both nameplates outperforming in the quarter. Over the past two years, our Polaris strategy has made us faster and more agile, which has been essential to navigate rapidly changing consumer trends and macro conditions. We expect to come out of this uncertain period in a strong position with a healthy balance sheet, new capabilities and a talented team ready to capture renewed demand.”
