Macy’s raises earnings forecasts, and says it has fresh inventory for the holidays

Macy’s flagship store in Herald Square in New York, December 23, 2021.

Scott Mill | CNBC

Messi On Thursday it raised its earnings forecast for the year as strong luxury sales boosted the store operator quarter and the arrival of new holiday merchandise.

The company left its revenue guidance unchanged, after trimming the outlook in August, as it faces a tougher sales backdrop during the retail industry’s most important quarter. The updated forecast came after Macy’s reported third-quarter revenue and earnings that beat Wall Street expectations.

Macy’s shares are up about 6% in pre-market trading.

In an interview with CNBC, Macy’s CEO Jeff Gennette said the company can maintain prices because it has new merchandise. This allowed her to bring in new clothes, household goods, and other gift-giving items. He said he doesn’t see customers turning to cheaper brands.

However, he said Macy’s saw sales decline in the last weeks of October and early November. Store and site visits remained the same – browsing did not lead to purchase. In the past week, he said, Macy’s has seen a return to better performance.

“Is this a slowdown in consumer confidence that we’re going to have throughout the fourth quarter?” He said. “Or will it go back to the buying patterns of 2019 when the weeks I’m quoting were already in line with the trend before going up to Christmas this year? Right now, we’re watching that very carefully.”

Here’s what Macy’s did in the fiscal third quarter ended Oct. 29 compared to what analysts had expected, based on Refinitiv estimates:

  • Earnings per share: 52 cents, adjusted versus 19 cents expected
  • Revenue: $5.23 billion vs. $5.2 billion expected

For the three-month period ended Oct. 29, Macy’s said Thursday that its net income fell to $108 million, or 39 cents per unadjusted share, down from $239 million, or 76 cents per share, a year ago.

Macy’s is trying to modernize its business, as well as navigate a rapidly changing economic backdrop. It’s in the middle of a turnaround plan, dubbed Polaris, that included store closures, investments in e-commerce and efforts to attract younger customers to its stores.

Compared to other retailers, Macy’s has lost huge sales gains during the pandemic — even as shoppers spent their stimulus checks. Its revenue remained relatively flat, reaching $5.17 billion during the third quarter of 2019, $3.99 billion in the third quarter of 2020, and $5.4 billion in the third quarter of 2021. This compares to $5.23 billion in the previous quarter. third quarter of this year. general.

Comparable sales on an owned and licensed basis decreased by 2.7% over the year-ago period.

However, Macy’s is in a better position than many of its competitors in terms of inventory. Its inventory level was up 7% yoy in the second quarter and 4% yoy in the third quarter. Compared to 2019 levels, its inventory in the third quarter was down 12% — a reflection of more aggressive commodity management, but stock-outs and shortages in the earlier part of the pandemic.

Spending bouts

The retailer has seen a shift in what people buy in the past few quarters, Genette said, as shoppers bought smart clothes instead of pajamas, workout clothes and home goods like bedding that they loaded up on earlier in the pandemic. He said this pattern has continued in recent months.

Luxury, in particular, was a strong point during the quarter. Shoppers turned to Macy’s Beauty department store chain, Bluemercury, and department store chain, Bloomingdale’s, to buy new clothes, shoes, and makeup. Those banners outdid the rest of the company.

At Bloomingdale’s, comparable sales on an owned and licensed basis were up 4.1%, as shoppers bought stylish apparel, women’s shoes, and luggage.

At Bluemercury, comparable sales on an owned and licensed basis were up 14%.

Jeannette said the company benefits from having store signs with a wide range of price points — so shoppers can choose a fancy perfume and then a lower-priced shirt from a private label.

As the main holiday shopping season approaches, Macy’s is facing inflation that is hovering at its highest level in four decades. The company cut its full-year revenue and expected earnings per share in August, saying it expects shoppers may spend less on discretionary goods like clothing because they pay more for groceries, housing, and gas.

Earlier this week, industry watchers obtained new clues about consumer health. Both Walmart And the targeting It reported marked declines in sales in categories such as apparel, electronics and home goods as shoppers spent more on essentials. Target cut its forecast for the holiday quarter, saying weak sales continued into November.

By contrast, Macy’s has stuck to the revenue guidance it provided in August, saying it still expects a range of $24.34 billion to $24.58 billion for the fiscal year. It raised the forecast for adjusted annual earnings per share to $4.07 to $4.27 per share, up from the previous range of $4 to $4.20.

As of Wednesday’s close, Macy’s shares are down about 25% so far this year. Shares closed Wednesday at $19.71, down about 8%.

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