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Macy’s Sees Mixed Results Amid Ongoing Turnaround Efforts
Macy’s reported varied outcomes in its latest earnings statement as investors closely observe CEO Tony Spring’s strategy for revitalizing the company, particularly with the involvement of yet another activist investor seeking to take the chain private.
During this critical holiday quarter, overall comparable sales across Macy’s brands—including Macy’s, Bloomingdale’s, and Blue Mercury—declined by 1.1%. However, there was a slight silver lining as comparable sales from its owned and licensed operations, along with its online marketplace, experienced a 0.2% increase, the best performance for this metric since the first quarter of 2022.
Notably, the “First 50” stores that Macy’s is focusing on in its turnaround strategy reported a 0.8% uptick in comparable sales, indicating a positive trend for four consecutive quarters.
These positive indicators suggest that while Macy’s turnaround plan is gaining some traction, it may take longer than anticipated to fully materialize.
For the fiscal year 2025, Macy’s has forecasted adjusted earnings per share in the range of $2.05 to $2.25 and total sales between $21 billion and $21.4 billion. These projections fall short of Wall Street expectations, which hover around $2.31 per share and $21.8 billion in sales, according to data from LSEG.
Financial Performance Overview
Assessing the department store’s financial performance for its fiscal fourth quarter reveals:
Earnings per share: $1.80 adjusted vs. $1.53 expected
Revenue: $7.77 billion vs. $7.87 billion expected
Macy’s recorded a net income of $342 million, or $1.21 per share, for the three-month period ending February 1, a substantial improvement from a loss of $128 million, or 47 cents per share, recorded during the same period last year. When accounting for one-time charges, including impairments and restructuring expenses, adjusted earnings came to $507 million, or $1.80 per share.
Sales for the quarter dipped to $7.77 billion, reflecting a 4% decrease from $8.12 billion the year before. This decline is partially attributed to an additional selling week in the prior year, contributing to skewed year-over-year comparisons.
Challenges and Responses
As CEO Tony Spring nears the end of his first year in leadership, the mixed results highlight ongoing challenges. Bloomingdale’s and Blue Mercury showed robust performances with comparable sales rising 4.8% and 6.2%, respectively. In contrast, the flagship Macy’s brand continued its struggles, with comparable sales declining by 1.9%.
To confront these persistent challenges, Spring has launched an ambitious plan to close 150 stores while simultaneously enhancing better-performing locations. Macy’s, alongside its competitors, has faced scrutiny for poorly maintained stores, inadequate staffing, and neglecting essential retail practices vital for survival in a competitive landscape.
Efforts to rectify these issues include targeting an initial 50 locations for investment aimed at improving staffing, merchandising, and the overall presentation of the store’s diverse offerings. Early results indicate that these efforts are paying off, as these locations have significantly outperformed others in the chain, with plans to extend this initiative further.
Once the closures are complete, Macy’s will still operate around 350 of its namesake stores, emphasizing that the path to a broader execution of its strategies will require considerable time and financial investment. The key question remains: will investors exhibit enough patience to witness the full implementation of Macy’s revitalization plans?
Activist Investor Pressure
In December, activist investor Barington Capital disclosed its stake in Macy’s and urged the company to reduce expenditures, contemplate the sale of its luxury brands, and conduct a thorough review of its real estate assets. This marks the fourth significant activist campaign the retailer has faced in the past decade.
Previous activist interventions, like those from Arkhouse and Brigade, have raised concerns that Barington’s primary interest lies in Macy’s valuable real estate portfolio rather than genuine efforts to revitalize the business. Nevertheless, Macy’s must prioritize shareholder interests, and a lack of swift action might compel them to heed activist demands.
On a positive note, Macy’s announced plans to reinstate share buybacks, leveraging its remaining $1.4 billion authorization for share repurchases, contingent on market conditions.
“Building on our momentum, we continue to elevate the customer experience, deliver operational excellence, and make prudent capital investments,” stated Adrian Mitchell, Macy’s Chief Operating Officer and Chief Financial Officer. “We remain committed to generating healthy free cash flow and returning capital to shareholders through share buybacks and predictable quarterly dividends.”
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