Macy’s (M): A look at the retailer’s expectations for the near term

Shares of Macy’s, Inc. (NYSE: M) were down over 1% on Thursday. The stock has dropped 40% year-to-date and 11% over the past three months. Earlier this week, the company delivered better-than-expected earnings results for the second quarter of 2023 despite the top and bottom line numbers declining on a year-over-year basis. It also reiterated its guidance for the full year. Here’s a look at the retailer’s expectations for the near term:

Sales

In the second quarter of 2023, Macy’s net sales decreased 8% year-over-year to $5 billion. Comparable sales were down 8.2% on an owned basis and down 7.3% on an owned-plus-licensed basis. The retailer saw an 8% drop in brick-and-mortar sales and a 10% drop in digital sales during the quarter.

For the third quarter of 2023, net sales are expected to range between $4.75-4.85 billion. For the full year of 2023, net sales are expected to be $22.8-23.2 billion while comparable sales on a 52-week owned-plus-licensed basis are expected to be down about 6.0-7.5% from last year.

Profitability

In Q2 2023, Macy’s reported a GAAP net loss of $22 million, or $0.08 per share. Adjusted EPS fell 74% to $0.26. Gross margin dropped to 38.1% from 38.9% in the year-ago period. Merchandise margin decreased 130 basis points due to higher levels of clearance markdowns and promotions to clear through spring seasonal product.

For Q3 2023, the company expects adjusted EPS to be down $0.03 to up $0.02. Gross margin is expected to be up by at least 140 basis points from the year-ago quarter. Last year, Macy’s had higher promotions and markdowns to clear warm weather seasonal goods and slow-moving pandemic-related categories like casual apparel. For FY2023, adjusted EPS is expected to be $2.70-3.20 while gross margin is expected to be 38.3-38.6%.

Small-format stores

On its quarterly conference call, Macy’s said it was pleased with the performance of its ten small-format locations, which include eight Macy’s and two Bloomie’s. The company saw positive comparable owned-plus-licensed sales growth for the Macy’s and Bloomie’s that have been open for over a year.

The retailer opened its ninth small-format Macy’s just outside Chicagoland area in Indiana last week, and it plans to open two more in September – one in Las Vegas and one in Boston. In addition, it plans to open a location in San Diego in November.