Macy’s (M) slid in pre-market trading as the major retailer slashed its FY24 sales forecast following mixed Q2 results. The department store operator reported Q2 adjusted earnings of $0.53 per share, compared to $0.26 per share in the same period last year. This was above analysts’ expectations of $0.30 per share.
Additionally, Macy’s net sales declined by 3.8% year-over-year to $4.9 billion, falling short of analysts’ forecasts of $5.1 billion. The company’s comparable sales at its stores declined by 4% in Q2.
Macy’s CEO Cites Cautious Spending Trends
In a CNBC interview, Macy’s CEO Tony Spring noted that customers are becoming more cautious with their spending across all Macy’s brands, including the upscale Bloomingdale’s. He observed a slowdown in purchasing, with even affluent consumers spending less than they did a year ago. Spring attributed this hesitation to various factors, including higher interest rates, unpredictable weather, and a distracting news cycle.
Macy’s Lowers FY24 Outlook
Looking ahead, the company has lowered its FY24 sales outlook to a range of $22.1 billion to $22.4 billion, down from its previous forecast of $22.3 billion to $22.9 billion. Macy’s also expects its comparable sales to decline year-over-year, projecting a drop of 2% to 0.5% for FY24, compared to the earlier forecast of a 1% to 1.5% decline.
Nevertheless, Macy’s has kept its adjusted earnings per share (EPS) guidance unchanged, forecasting it to be between $2.55 and $2.90 per share. Analysts project the company will report adjusted earnings of $2.78 per share on revenues of $22.5 billion.
Is Macy’s Turnaround Plan Working?
The retailer highlighted progress in its turnaround plan, introduced in February after Tony Spring became CEO. Spring stated that among the first 50 stores receiving additional investment, comparable sales rose by 1%, marking the second consecutive quarter of growth at those locations.
Building on this success, Spring noted that these stores outperformed others, even in challenging categories like handbags. To capitalize on this momentum, the company plans to expand this strategy in the fourth quarter, increasing staffing in the women’s shoes and handbags departments at more locations based on customer response.
Separately, Macy’s announced last month that it had ended negotiations to go private. This decision followed a unanimous board vote to reject a bid from Arkhouse Management and Brigade Capital.
Is Macy’s Stock a Buy or Sell?
Analysts remain sidelined about Macy’s stock, with a Hold consensus rating based on three Buys, seven Holds, and one Sell. Over the past year, Macy’s has surged by more than 20%, and the average M price target of $18.50 implies an upside potential of 4.3% from current levels. These analyst ratings are likely to change following Macy’s results today.
