A month after rejecting a $6.9 billion buyout offer, Macy’s ( M ) reported another quarter of declining sales.
On Wednesday, Macy’s reported a 3.8% decline in year-over-year net sales to $4.9 billion, missing estimates of $5.06 billion. Same-store sales fell 4%, worse than the expected 0.27% drop. Its stock fell more than 7% in premarket trading.
Adjusted earnings beat Wall Street expectations by $0.24, by $0.53. CFO and COO Adrian Mitchell told Yahoo Finance that consumers “individually” are still “under pressure” and looking for value.
The statement came after the company on July 15 concluded talks on a possible buyout bid from one of its shareholders, Arkhouse, and its partner Brigade Capital Management.
Mitchell said, “There’s not enough evidence to indicate that any potential transaction is viable… You have to have the funds to do a transaction.”
He added that offering $24.80 was “not mandatory” given Macy’s capacity. Management is now focusing on its turnaround strategy, which it calls “a bold new chapter.”
The offer represents an approximately 60% premium over Macy’s stock price on November 30, 2023. Mitchell said he believes the strategy will make it more valuable than Macy’s.
One of Arkhouse’s main goals is to reposition its large real estate portfolio. The company is set to announce its first wave of 55 store closings this year, up from the 50 planned earlier this year. It plans to close a total of 150.
“We’re getting a lot of traction in real estate monetization,” he said. “We originally had a range of $90 to $115 million in asset sale gains this year. We are now improving that outlook… to approximately $115 million.”
In Q2, the company saw $36 million in asset sales gains and forecasts another $30 million in Q3 and $67 million in Q4.
This February CEO Tony Spring introduced “a bold new chapter” in Q1. The strategy includes closing underperforming stores, developing remaining “go-forward” locations and investing in digital sales.
Macy’s said in a spring release that same-store sales increased in its top 50 priority locations.
At these 50 locations where the company is testing new strategies, sales are up 0.8% year over year.
“We saw traffic and conversion in these first 50 Macy’s stores [that] Better than other stores. Looking at the customers, we see that a large number of complete customers appear in these stores. It is up to the previous year,” he said.
Sales at non-improved other stores fell 3.8%. Among the group of stores it plans to close, sales fell 6.5%.
Morgan Stanley analyst Alex Stratton expects “greater market confidence” when the P&L starts to show “visibility” from its turnaround plan in mid-2025, following initial store closures and investment in 50 high-performing stores.
Shares of Macy’s are down nearly 12% this year, compared with a 17% gain for the S&P 500s ( ^GSPC ).
Macy’s Q2 earnings come as shoppers are tired of high costs and on the hunt for deals.
According to a report Placer.ai, Macy’s year-over-month visits declined for most of 2024.
“The chain’s weekly foot traffic has been at or above 2023 levels since mid-month. [July] — may be fueled by back-to-school shopping and sales,” Placer.ai wrote in a post.
Same-store sales at its luxury subsidiary Bloomingdale’s fell 1.1%, but rose 2% for its cosmetics chain Bloomercury.
“The reality is that a luxury consumer has dollars to spend, but they’re not immune to being aware of how they’re thinking about their spending,” Mitchell said. “We’ve seen some headlines in relation to some luxury brands.”
Bloomberg and the beauty business are “a solid category even with some of the pressures we’re seeing,” he said.
UBS analyst Jay Soule said Macy’s “structural challenges” will “cause it to lose share to off-price retailers, brands and Amazon.”
TJX Companies, Inc., the parent company of TJ Maxx, Marshall’s and Home Goods
Merchandise margin increased 210 basis points, driven by lower year-over-year discounts, the company said.
Income statement
Here’s what Macy’s reported compared to Wall Street estimates:
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Net Sales: $4.9 billion and $5.06 billion
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Adjusted EPS: $0.53 and $0.29
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One-stop-shop: -4.0% vs. -0.27%
The company expects continued pressure in the back half of 2024, lowering its outlook for the year.
It expects net revenue to come in between $22.1 billion and $22.4 billion, down from the $22.3 billion to $22.9 billion previously expected.
Same-store sales are expected to decline 2% to 5% annually. It had previously expected same-store sales to be up 1% to 1.5%.
Mitchell attributed the lower outlook to “realization of second-quarter sales results” and “the need to navigate the uncertainty we see around discretionary spending.”
“Considering all the indicators we’ve seen in the economy, that’s what we’re hearing from economists [and] The ratio of discretionary spending versus essential spending, it changes us a little bit.”
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Brooke DePalma is a senior reporter at Yahoo Finance. Follow her on Twitter at @Brooke DePalma Or send an email to [email protected].
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