Macy’s Inc., citing the impact of inflation, inventory gluts and changing consumer behaviors, reported top and bottom line declines for the second quarter and lowered its forecast for the year overall.
However, the company said it’s gaining new customers, is well positioned to navigate the uncertain retail landscape, that luxury continued strong, and that the Q2 results beat expectations.
Net income for the quarter ended July 30 fell to $275 million, or diluted earnings per share of $0.99, from $345 million a year ago, or $1.08 a share.
Adjusted diluted earnings per share of $1 compared to adjusted earnings per share of $1.29 in the year-ago period.
This compares to diluted earnings per share and adjusted diluted earnings per share of $0.28 in the second quarter of 2019.
Operating income dropped to $399 million last quarter from $597 million in the year-ago period.
Total sales slipped to $5.6 billion from $5.65 billion; comparable sales fell 1.6 percent but rose 4.4 percent versus the second quarter of 2019.
“During the second quarter, we delivered solid results, despite the challenging environment,” said Jeff Gennette, chairman and chief executive officer of Macy’s Inc. “Our teams have consistently responded to the dynamic landscape with disciplined, data-driven actions to ensure the health and stability of our business. We believe that we are well positioned to respond to changing consumer behaviors. Despite inflationary pressures, consumers continued to shop Macy’s as a style source and leading gifting destination. Additionally, Bloomingdale’s and Bluemercury captured demand for luxury brands, resulting in both nameplates outperforming in the quarter.
“Over the past two years, our Polaris strategy has made us faster and more agile, which has been essential to navigate rapidly changing consumer trends and macro conditions,” Gennette added. “We expect to come out of this uncertain period in a strong position with a healthy balance sheet, new capabilities and a talented team ready to capture renewed demand,” Gennette continued.
Macy’s results were consistent with those of other major retailers reporting Q2 declines due to inflation, inventory gluts, recession fears and the lack of last year’s stimulus benefit, including Kohl’s Corp. and Target, though Walmart was lifted by grocery sales in Q2.
Macy’s inventory was up 7 percent year-over-year and down 8 percent versus 2019, reflecting “disciplined inventory management in an environment of continued supply chain volatility,” the company said. “Where it had flexibility, the company cut receipts to manage inventory levels in line with consumer demand. However, in certain categories inventory levels remain elevated due to reduced year-over-year sell-throughs since Father’s Day driven by the industry-wide levels of excess inventory and a slowdown in consumer discretionary spend.”
Digital sales decreased 5 percent year-over-year while increasing 37 percent versus the second quarter of 2019.
Digital penetration was 30 percent of net sales, a 2-percentage point decline from the second quarter of 2021, but 8 points higher than the second quarter of 2019.
By division, Macy’s comparable sales were down 2.8 percent, but Bloomingdale’s comparable sales were up 5.8 percent.
Bluemercury’s comparable sales were up 7.6 percent.
Macy’s now forecasts net sales for the year overall will be in the range of $24.34 billion to $24.58 billion and adjusted earnings per share of $4 to $4.20.
That compares to the previous forecast of $24.46 billion to $24.7 billion in sales, and $4.53 to $4.95 in adjusted earnings per share.