Macy’s Surpasses First-Quarter Forecasts Nonetheless Takeover Considerations Linger

Macy’s Inc. (NYSE:M) posted a better Q1 report, but the prospect of a buyout looms on the horizon.

The retail giant reported a revenue of $4.85 billion Tuesday morning, down 2.7% year over year, but that was still higher than the $4.81 billion Wall Street predicted. Adjusted earnings per share was $0.27, well above expectations of $0.14.

Sales at company-owned stores fell only 1.2%, beating Wall Street’s estimates of a 3.01% decline.

Macy’s CFO and COO Adrian Mitchell sounded optimistic about the company’s progress, especially with the changes that CEO Tony Spring laid out earlier this year in a plan called the “Bold New Chapter.” The plan involves closing 150 underperforming stores, improving the remaining stores and their product mix, and investing in digital sales.

During the quarter, Macy’s Focus Stores saw same-store sales grow 0.1%, compared with a 4.5% drop in stores set to close. Spring credited the gains to new and expanded brands, including Donna Karan, French Connection, Free People, Karl Lagerfeld, and Hugo Boss.

Macy’s now expects net sales for 2024 to be between $22.3 billion and $22.9 billion; comparable sales are seen falling 1% to rising 1.5% over last year.

The company also raised its adjusted earnings guidance for the year, now expecting a range of $2.55 to $2.90 per share, up from a prior view of $2.45 to $2.85.

Despite the better-than-expected results, Wall Street analysts are still skeptical about Macy’s. UBS analyst Jay Sole said it’s uncertain whether the company’s new initiatives will be successful.

Zachary Warring, an analyst at CFRA, predicts that Macy’s sales will continue to decline over the next five years as off-price retailers, brands, and Amazon increase competition.

The company offered no updates on the $6.6 billion takeover offer from Arkhouse Management and Brigade Capital Management, suggesting that it is focused on improving operations and customer experience as a public company.

Macy’s had a market cap of roughly $5.3 billion as of Monday’s market close.

Here’s a recap of Macy’s Q1 performance versus analyst estimates:

  • Net sales: $4.85 billion vs. $4.81 billion
  • Adjusted EPS: $0.27 vs. $0.14
  • Same-store sales: -0.30% vs. -2.78%
  • Licensed stores: 0.90% vs. 0.30%
  • Company-owned stores: -1.2% vs. -3.01%
  • Gross margin: 39.2% vs. 39.63%
  • Adjusted net income: $77 million vs. $39.6 million

Macy’s subsidiaries, Bloomingdale’s and Bluemercury, both posted positive same-store sales growth, up 0.8% and 4.3%, respectively, with beauty products among the top performers.

Credit card revenue fell to $117 million, reflecting expectations of higher delinquency rates and net credit losses.

Looking ahead, Macy’s could offer more promotions or discounts in Q2 to entice value-oriented shoppers, while keeping a close eye on merchandise margins and inventory.