Macy’s Inc., impacted by higher levels of markdowns to clear spring merchandise and customers pulling back on spending, reported second-quarter top- and bottom-line declines but said the results were better than expected.
The net loss came to $22 million for the quarter ended July 29, compared to a $275 million profit in the year-ago period. The loss included a non-cash settlement charge related to the transfer of pension obligations for certain retirees and beneficiaries.
Diluted loss per share of $0.08 and adjusted diluted earnings per share of $0.26 last quarter compared to diluted EPS of $0.99 and adjusted EPS of $1 in the second quarter of 2022.
Earnings before interest, taxes, depreciation and amortization were $221 million in the latest quarter, compared to $614 million in the year-ago quarter.
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Net sales of $5.13 billion declined 8 percent from the $5.6 billion generated in the second quarter of 2022.
In pre-market trading Tuesday morning, Macy’s stock price was down about 1.6 percent to $14.49.
“In the second quarter, we delivered better-than-expected top and bottom-line results,” said Jeff Gennette, the outgoing chairman and chief executive officer of Macy’s Inc., said in a statement Tuesday. “Our teams surgically implemented clearance markdowns and promotions to effectively clear spring seasonal receipts and ensure fresh assortments for the fall and holiday seasons.”
“We continue to see uncertainty in the macroeconomic environment. We are leveraging our robust data science tools to refine inventory composition, while reading and reacting to shifting consumer preferences to meet demand,” Gennette continued. “Looking ahead, we are committed to fortifying our core business and improving our customer experience while investing in our five growth vectors. We believe these advancements, enabled by our strong talent, will drive our relevancy and long-term success as a modern department store.”
Macy’s growth initiatives include growing and “reimagining” private brands; off-mall expansion via the Market by Macy’s, Bloomie’s and Bloomingdale’s outlet smaller formats; online marketplace expansion; luxury acceleration, and personalization initiatives in offerings and communications with customers.
Gennette will retire in February 2024 and will be succeeded by Macy’s Inc. president Tony Spring, the former CEO of Bloomingdale’s. The retailer is deep in a search process to hire a new Bloomingdale’s CEO.
By division:
- Macy’s comparable sales were down 8.2 percent. Strength was seen in beauty, particularly fragrances and prestige cosmetics, women’s career sportswear, men’s tailored and off-price with Backstage, while active, casual and sleepwear remained challenged.
- Bloomingdale’s comparable sales on an owned basis were down 2.6 percent. Bestselling categories were beauty, women’s contemporary and designer apparel, shoes and the outlet locations, while handbags, men’s and dresses were soft.
- Bluemercury comparable sales were up 5.8 percent, with the business paced by skin care and color cosmetics.
By channel, brick-and-mortar sales decreased 8 percent versus the second quarter of 2022. Digital sales decreased 10 percent versus the second quarter of 2022. Comparable sales were down 7.3 percent, on an owned-plus-licensed basis.
The company also reported that inventories were down 10 percent year-over-year and down 18 percent to 2019, “reflecting ongoing disciplined inventory management and the clearance of excess spring seasonal product. The company continues to focus on ensuring that merchandise inventories are current, contain compelling product, and are at the appropriate receipt levels based on expected sales demand.”
Credit card revenues were negatively impacted by an increased rate of delinquencies across all stages of aged balances within the portfolio. “While the company had expected delinquencies to rise as part of the normalizing credit environment, the speed at which the increase occurred for the company and the broader credit card industry since the company’s first-quarter earnings call was faster than expected. This negatively impacted second-quarter results and led to an increase in the portfolio’s bad debt outlook.
Gross margin rate for the quarter was 38.1 percent, down from 38.9 percent in the second quarter of 2022.
Merchandise margin declined 130 basis points, due to heightened levels of clearance markdowns and promotions needed compared to the prior year to clear through spring seasonal product. Unfavorable category mix shifts and a shift in the timing of shortage recognition were partially offset by better inbound freight charges from the company’s costs savings efforts.
Target last week also reported a quarterly sales decline due to consumers hesitant to spend and the backlash by some shoppers to the store’s Pride merchandise. However, Walmart, buoyed by its strong grocery assortment and values, reported gains on the top and bottom lines.
This story was reported by WWD and originally appeared on WWD.com.
