Macy’s Turns Profitable in Q2 Despite Sales Drop
Macy’s Inc., demonstrating strong operating discipline in a tough retail environment, turned profitable in the second quarter despite reduced sales volume.
On Wednesday, the retailer reported net income of $150 million for the second quarter ended Aug. 3, compared to a loss of $22 million in the year-ago period.
However, net sales decreased 3.8 percent to $4.94 billion, from $5.13 billion in the year-ago period. Comparable sales were down 4 percent on an owned basis and down 3.3 percent on an owned, licensed and marketplace basis.
Macy’s Inc.’ go-forward business comparable sales, including its go-forward locations and digital business, were down 3.8 percent on an owned basis, and down 3 percent on an owned,-licensed and marketplace basis.
The company updated its annual outlook to reflect a more discriminating consumer and heightened promotional environment relative to its prior expectations.
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Net sales for the year are now projected at $22.1 billion to $22.4 billion versus previous guidance of $22.3 billion to $22.9 billion. Comparable sales are now projected down 2 percent to 0.5 percent, versus previous guidance of down 1 percent to up 1.5 percent. The projected adjusted earnings per share for the year is unchanged at $2.55 to $2.90.
“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. “Our colleagues executed with discipline, supporting gross margin expansion and effective expense control throughout the organization. We are seeing signs of our strategy taking root, including two consecutive quarters of positive comparable sales in Macy’s first 50 locations. We are encouraged by the early traction of our ‘Bold New Chapter’ and remain committed to returning Macy’s, Inc. to sustainable profitable growth.”
Macy’s Bold New Chapter strategy, announced in February 2024, involves closing approximately 150 underproductive locations through 2026, including about 50 by the end of the fiscal year; prioritizing investment in approximately 350 “go-forward” locations, and expanding its small-format store chains. The corporation’s small retail formats are Bloomie’s, the specialized and downsized Macy’s units, Bloomingdale’s outlets, and Backstage off-price units.
More specifically, the strategy calls for opening approximately 15 Bloomie’s stores and at least 30 Bluemercury stores in new and existing markets over the next three years, along with roughly 30 Bluemercury remodels. Bloomie’s locations are downsized versions of the full-line Bloomingdale’s offering a curated assortment weighted toward contemporary and luxury brands. Macy’s also expects to monetize $600 million to $750 million of assets through 2026, mostly through selling off stores, outparcels such as parking lots, as well as some logistic centers.
Last quarter net sales at the Macy’s division were down 4.4 percent. Comparable sales were down 4.5 percent on an owned basis and down 3.6 percent on an owned-plus-licensed-plus-marketplace basis. Macy’s go-forward business comparable sales, including Macy’s go-forward locations and digital, dropped 4.3 percent on an owned basis and were down 3.3 percent on an owned, licensed and marketplace basis.
Bloomingdale’s net sales were down 0.2 percent last quarter; comparable sales were down 1.1 percent on an owned basis and down 1.4 percent on an owned, licensed and marketplace basis.
Bluemercury net sales were up 1.7 percent. Comparable sales were up 2 percent on an owned basis.
In other Q2 results, inventories increased 6 percent and were higher than expected due to second quarter sales results as well as the decision to invest into areas of strength for the second half of 2024. The gross margin rate of 40.5 percent increased 240 basis points.
