Macy’s (M) anticipates caution on discretionary spending will continue in Q4 2024

Shares of Macy’s, Inc. (NYSE: M) stayed green on Thursday. The stock has gained 13% over the past three months. The retailer delivered mixed results for the third quarter of 2024 as revenue surpassed estimates while earnings fell short. The company, which dealt with an accounting discrepancy recently, also updated its outlook for the full year.

Q3 performance

Macy’s saw revenue, comparable sales and earnings decline on a year-over-year basis in the third quarter of 2024. Net sales decreased 2.4% to $4.7 billion while total enterprise comparable sales were down 1.3%. GAAP earnings per share decreased 33% to $0.10 while adjusted EPS fell 81% to $0.04.

Sales growth at Macy’s First 50 locations, Bloomingdale’s, and Bluemercury was offset by weakness in Macy’s non-First 50 locations, its digital channel and cold weather categories.

Pressure on consumer spend and revised outlook

Macy’s assumes consumers will continue to be weighed down by inflationary pressures during the fourth quarter of 2024, leading them to be cautious in their discretionary spend. The company is forecasting net sales of $7.8-8.0 billion for Q4 2024. On a 13-week basis, net sales are expected to be down approx. 1% to up approx. 1.5%. Gross margin is expected to be 35.3-35.7%, as the retailer anticipates a heightened promotional environment. Adjusted EPS is projected to be $1.40-1.65.

Macy’s revised its guidance for the full year of 2024. While raising its expectations slightly for sales and comps, it lowered its outlook for earnings and margins. Net sales are now expected to be $22.3-22.5 billion versus the previous range of $22.1-22.4 billion. Total enterprise comparable sales, on a 52-week basis, are now expected to be down 1% to flat versus the earlier estimate of down 2% to down 0.5%. Gross margin is now expected to be 38.2-38.3% versus the prior range of 38.6-38.8%. Adjusted EPS is now expected to be $2.25-2.50 versus the previous range of $2.34-2.69.

Bold New Chapter strategy

As mentioned on its conference call, Macy’s continues to gain traction on all three pillars of its Bold New Chapter strategy. Firstly, in terms of strengthening the Macy’s nameplate, the retailer recorded comparable sales growth of 1.9% for the First 50 locations in Q3, marking their third consecutive quarter of comps growth. The company saw strength in categories such as fragrances, dresses and men’s and women’s active apparel along with a sequential improvement in categories like handbags.

Secondly, with regards to accelerating luxury growth, both Bloomingdale’s and Bluemercury delivered sales growth and positive comps for the third quarter. Bloomingdale’s grew net sales by 1.4% while comparable sales were up 3.2% on an owned-plus-licensed-plus-marketplace basis. Bluemercury net sales rose 3.2% while comparable sales were up 3.3% on an owned basis, marking the 15^th consecutive quarter of comps growth.

Thirdly, Macy’s is making progress on simplifying and modernizing its operations. The company is working on updating its technology, improving its search platforms and improving its customer experience. It is also working on making its supply chain network more efficient and effective.

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