On Tuesday, Macy’s lowered its full-year projection, stating that it expects consumer spending on discretionary products, such as clothing, to decline, necessitating the use of significant markdowns to move merchandise off the shelves.
The caution was issued despite the store reporting a profit and revenue for the second quarter of its fiscal year that exceeded analysts’ estimates.
As opposed to earlier projections of $24.46 billion to $24.7 billion, Macy’s now expects fiscal 2022 revenue to be in the range of $24.34 billion to $24.58 billion. It lowers the previous projection of $4.53 to $4.95 to a range of $4.00 to $4.20 for annual adjusted earnings per share. According to Refinitiv consensus forecasts, Wall Street analysts had anticipated full-year guidance of $24.36 billion and $4.51 per share.
CEO Jeff Gennette stated in a statement, “We intend to emerge out of this uncertain phase in a solid position with a healthy financial sheet.
Based on Refinitiv estimates, the following chart shows how Macy’s performed in its fiscal second quarter in comparison to expectations from analysts:
$1 adjusted earnings per share vs an expectation of 85 cents
Revenue: $5.6 billion vs the anticipated $5.49 billion
From $345 million, or $1.08 per share, in the three months before to July 30, net income decreased to $275 million, or 99 cents per share.
Net revenues decreased marginally from $5.65 billion to $5.6 billion from the previous year.
On an owned plus licenced basis, Macy’s comparable sales decreased 1.6% from the previous year. Refinitiv claims that analysts had anticipated a 2% decline.
According to Macy’s, despite a 5% decrease from the previous year, digital sales were still up 37% from pre-pandemic levels. Sales from online transactions made about 30% of overall sales.
According to Gennette, Macy’s so-called Polaris turnaround plans, which involved closing stores and investing in its digital operations, have made the firm more responsive and quick-thinking. According to him, doing so has been “critical to negotiate quickly shifting consumer patterns and macro situations.”
Nevertheless, despite decades-high inflation, Macy’s cannot avoid a change in consumer behaviour.
According to Macy’s, inventory levels increased 7% over the same period last year. By the end of the year, the department store company stated, it aims to have “acceptable” inventory levels.
In order to get rid of out-of-date inventory, the company claimed to be employing markdowns on seasonal items, private-label products, and pandemic-related categories including exercise wear, sleepwear, and home goods.