Sales growth
Comp sales for the Macy’s brand were up 10.1% on an owned plus licensed basis. The retailer witnessed shifts in shopping patterns during the quarter as customers ditched digital shopping in favor of returning to stores. There was also a higher preference for occasion-based apparel like dresses and women’s shoes over the pandemic-favorite categories like casualwear and active wear.
Despite a slowdown from the previous quarter, digital sales rose 2% compared to 2021 and 34% compared to 2019. More than 88% of the company’s omnichannel markets witnessed sales growth during the quarter.
Profitability and margins
Macy’s delivered adjusted EPS of $1.08 in Q1, which was almost three times higher than the $0.39 reported in the year-ago period. The bottom line performance was driven by higher gross margins and disciplined expense management.
Adjusted EBITDA margin rose 270 basis points YoY to 12.8%. Gross margin during the quarter increased 100 basis points YoY to 39.6%. Merchandise margin rose 50 basis points, benefiting from higher average unit retail which was in turn driven by lower promotions on regular price merchandise, higher ticket prices and category mix.
Guidance
Macy’s reaffirmed its sales guidance and raised its earnings guidance for the full year of 2022. The company believes its outlook reflects the risks associated with the ongoing macroeconomic uncertainty. The retailer expects net sales to range between $24.4-24.7 billion, which reflects a growth of flat to up 1% YoY.
Digital sales, as a percent of net sales, are expected to be approx. 35%, down from the previous estimate of 37%. The reduction in digital penetration is due to the shift from digital to in-store shopping as well as the shift to occasion-based apparel, which has a higher return rate than categories like home and beauty.
Adjusted EBITDA as a percent of sales is expected to be 11.2-11.7% in FY2022. Macy’s raised its adjusted EPS guidance to a range of $4.53-4.95 from the previous range of $4.13-4.52. For the second quarter of 2022, the company expects net sales of $5.5-5.6 billion and adjusted EPS of $0.84-0.94.
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