What to expect when Macy’s (M) reports its Q2 2024 earnings results

Shares of Macy’s, Inc. (NYSE: M) gained over 4% on Friday. The stock has dropped 9% over the past three months. The retailer is scheduled to report its second quarter 2024 earnings results on Wednesday, August 21, before market open. Here’s a look at what to expect from the earnings report:

Revenue

For the second quarter of 2024, Macy’s has guided for net sales of $4.97 billion to $5.1 billion. Analysts are projecting revenues of $5.1 billion. This compares to net sales of $5 billion reported in the same period a year ago. In the first quarter of 2024, net sales decreased nearly 3% year-over-year to $4.8 billion.

Earnings

For Q2 2024, Macy’s has guided for adjusted EPS of $0.25-0.33. Analysts are predicting EPS of $0.30. This compares to adjusted EPS of $0.26 reported in Q2 2023. In Q1 2024, adjusted EPS fell 52% YoY to $0.27.

Points to note

The economic environment remains dynamic with inflationary pressures weighing on discretionary purchases. This is likely to have impacted Macy’s top line in the second quarter. In Q1, the company’s comparable sales decreased 1.2% on an owned basis and 0.3% on an owned-plus-licensed-plus-marketplace basis.

Across its nameplates, although the Macy’s nameplate saw a drop in comparable sales last quarter, Bloomingdale’s and Bluemercury remained bright spots with both recording comparable sales increases during the period. This strength can be expected to continue in Q2 as well.

Macy’s has been making progress on its Bold New Chapter initiative. It continues to invest in improving its omnichannel capabilities and enhancing its product assortment. As part of its private brand apparel initiative, last quarter, the retailer completed the majority of its brand exits and launched several new ones. As this transition continues, Macy’s expects private brand sales volumes to remain depressed in the near term and to see a pickup later in the year.

In Q1, credit card revenues fell nearly 28% YoY to $117 million, hurt by higher delinquency rates and net credit losses. Credit card revenues for the second quarter of 2024 are expected to be flat with the $120 million reported in the year-ago period.

Last quarter, gross margin declined 80 basis points to 39.2%, mainly due to additional discounting for slower-moving warm weather products. For Q2, gross margin is expected to be at least 170 basis points better than last year, reflecting the lapping of higher discounts on excess seasonal goods, discounting of spring assortments, and the liquidation of select men’s private brands.