Macy’s (M) beat moderate first-quarter 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% from last year and slightly above Wall Street estimates of $4.81 billion. of dollars. Its adjusted earnings per share of $0.27 also exceeded the expected $0.14.
Same-store sales fell 1.2% at company-owned stores, less than the 3.01% drop Wall Street expected.
“We think we are gaining ground, it is still early… We are still putting into practice the changes in the stores from a staffing, sales and service perspective, there are a number “of changes that are still not implemented,” Macy’s CFO and COO Adrian Mitchell told Yahoo Finance by phone.
This is the first quarterly report since CEO Tony Spring, who took over as CEO earlier this year, launched the “A Bold New Chapter” initiative. The overall strategy includes closing 150 underperforming stores over the next three years, improving remaining stores and product assortment, and investing in digital sales.
During the quarter, the remaining Target stores saw same-store sales grow 0.1%, compared to a 4.5% decline at closed stores.
On an investor call, Spring said the addition of “new brands like Donna Karan or the expansion of brands like French Connection, Free People, Karl Lagerfeld and Hugo Boss” had helped drive sales at those stores. targets.
The company now expects to end 2024 with net revenue between $22.3 billion and $22.9 billion. Same-store sales are expected to range from a 1% year-over-year decline to a 1.5% increase. This compares to the previous expectation of a decline of around 1.5% to an increase of 1.5%.
Adjusted earnings were also boosted, and are expected to end the year in a range of $2.55 to $2.90, up from $2.45 to $2.85.
“We’re not making any assumptions about whether consumers are going to get better,” Mitchell said of the tough consumer environment. “We continue to believe that there is a lot of uncertainty and that inflation remains stubborn.”
Wall Street remains skeptical about the company’s future.
Before the report was released, Jay Sole, an analyst at UBS, said it was “unlikely” the new initiatives would 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 optimistic scenario. ” He identified the three key areas as “Macy’s Backstage, Macy’s small store initiative and its omnichannel service enhancements, both online and in-store.”
Since 2012, Macy’s has lost 25% of its market share “primarily to Off-Price retailers, brands and Amazon,” according to Sole.
CFRA analyst Zachary Warring expects sales to continue to decline, “with a single-digit decline over the next five years,” he wrote in a client note.
The company provided no updates on Arkhouse Management and partner Brigade’s $6.6 billion bid 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 buyers to conduct financial due diligence.
“We’re going to focus on continuing to simplify our business to increase our margins and invest in the customer experience. But now it’s about growth,” said Mitchell, who alluded to the desire of Macy’s to stay the course as a public company.
As of Monday’s market close, Macy’s had a market capitalization of approximately $5.3 billion.
Summary of winnings
Here’s what Macy’s reported, compared to Wall Street estimates, according to Bloomberg data:
Net sales: $4.85 billion versus $4.81 billion
Adjusted EPS: $0.27 versus $0.14
In-store sales: -0.30% versus -2.78%
Gross margin: 39.2% versus 39.63%
Adjusted net income: $77 million versus $39.6 million
Other areas of note include its two subsidiaries, Bloomingdale’s and cosmetics company Bluemercury, both of which saw same-store sales increase, up 0.8% and 4.3%, respectively.
“We’re just building on those luxury brands. We’re really happy with the performance and think there’s a lot more ground to cover,” said Mitchell, who also identified beauty as a favored category for customers .
The company’s credit card revenue fell $45 million to $117 million, due to “the impact of expected higher delinquency rates and net credit losses within the portfolio.”
Mitchell said the team was monitoring the situation “very closely.”
“Our credit card customer tends to be a relatively healthy customer within the portfolio… But what we’re seeing is not unusual relative to our projections,” he said.
He added that more promotions or discounts could occur in the second quarter, as Macy’s seeks to attract value-oriented customers.
Merchandise margin fell 1% in the quarter, driven by discounts on warm-weather products, while merchandise inventories were 1.7% higher than last year, Warring wrote in a separate note.
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email him at bdipalma@yahoofinance.com.
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News Source : finance.yahoo.com
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