Macy’s (M) Q3 2022 Earnings

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

Scott Mlyn | CNBC

Macy’s On Thursday, the department store operator raised its profit forecast for the year after saying it had fresh merchandise and was ready for the holiday shopping season.

The company stuck to its revenue guidance as the retailer faced a tougher sales backdrop in the industry’s most important quarter. The revised outlook comes after Macy’s reported third-quarter revenue and earnings that beat Wall Street expectations.

Shares of Macy’s rose nearly 6% in premarket trading.

In an interview with CNBC, Macy’s CEO Jeff Gennette said the company can hold its price line because it has fresh merchandise. This allowed her to bring in new clothing, household items, and other gift-giving items. He said he hasn’t seen customers trade up to cheaper brands.

However, he said sales at Macy’s were down in the last weeks of October and early November. Store and website visits remained the same – but search did not lead to purchase. Last week, he said, Macy’s returned to a better performance.

“Is this a decline in consumer confidence that we’re going to go all the way through the fourth quarter?” he said. “Or am I going back to the 2019 buying patterns that the weeks I’m quoting were actually in line with the current trend before going into Christmas this year? We’re watching that very closely at the moment.”

Here’s how Macy’s fared in its fiscal third quarter ended Oct. 29, compared with analysts’ expectations based on Refinitiv estimates:

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

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

Macy’s is trying to modernize its business while navigating a rapidly changing economic backdrop. The store closures are in the midst of a turnaround plan called Polaris, which includes investments in e-commerce and efforts to attract younger customers to its stores.

Compared to other retail players, Macy’s hasn’t seen a big gain in sales during the pandemic — even as shoppers pass stimulus checks. Its revenue remained relatively flat at $5.17 billion in 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 is equivalent to $5.23 billion in the third quarter of this year. year

Comparable sales on an owned and licensed basis were down 2.7% from a year ago.

Still, Macy’s is in a better position than many of its competitors in terms of inventory. Its inventory level increased by 7% year-on-year in the second quarter and 4% in the third quarter. Compared to 2019 levels, its inventories fell 12% in the third quarter – a reflection of tighter management of goods, but stocks and shortages in the earlier part of the pandemic.

Spending queues

The retailer has seen a shift in what people are buying over the past few quarters, Gennette said, as shoppers buy more stylish clothing instead of homewares like pajamas, workout clothes and bedding that they previously stocked up on during the pandemic. He said that this model is in recent months.

Luxury, in particular, was a point of strength during the quarter. Shoppers turned to beauty chain Macy’s, Bluemercury and high-end department store chain Bloomingdale’s for new clothes, shoes and makeup. Those banners stood out from the rest of the company.

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

At Bluemercury, proprietary and licensed comparable sales increased 14%.

Gennette said the company benefits from having store banners with a wide range of price points — so shoppers can choose a high-end fragrance and then a lower-priced T-shirt from a private label.

Heading into the prime holiday shopping season, Macy’s is facing the highest level of inflation in nearly four decades. The company cut its full-year revenue and earnings-per-share forecast in August, saying it expected shoppers to spend less on discretionary goods like clothing as they pay more for food, housing and gas.

Earlier this week, industry watchers got fresh clues about consumer health. Both of Walmart and Target Categories such as apparel, electronics and homewares reported sharp declines as shoppers spent more on necessities. Target cut its forecast for the holiday quarter, saying weak sales continued into November.

Macy’s, by contrast, stuck to its August revenue guidance, saying it still expects a range of $24.34 billion to $24.58 billion for the fiscal year. It raised its annual adjusted earnings per share forecast to $4.20 from $4.07 to $4.20 previously.

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

This story breaks. Please check for updates.

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