Macy's lowers full-year sales guidance despite Q2 earnings beat

21st Aug 2024 13:10

(Sharecast News) - Shares in US department store retailer Macy's were sliding early on Wednesday, after it reported better-than-expected second-quarter earnings despite a drop in sales, and revised its full-year guidance downwards.

The company posted diluted earnings per share of 53 cents, swinging from a loss of eight cents per share in the same quarter last year.

Net sales totalled $4.9bn, down 3.8% year-on-year, while comparable sales dropped 4% on an owned basis.

The company attributed the improved earnings to a gross margin of 40.5%, up 240 basis points from the prior year, driven by lower discounting and better inventory management.

However, Macy's acknowledged that consumer spending remained pressured, prompting the company to revise its full-year sales outlook.

The updated guidance anticipated net sales for the year of between $22.1bn and $22.4bn, down slightly from earlier projections of $22.3bn to $22.9bn.

Macy's highlighted the success of its 'First 50' locations, which achieved a 0.8% increase in comparable sales, marking the second consecutive quarter of positive growth for the stores.

Bloomingdale's saw a slight sales decline, while Bluemercury reported a 1.7% increase in net sales.

Looking ahead, Macy's said it saw 2024 as a transitional year, with plans to focus on key strategic investments and enhanced expense controls.

Despite a tougher promotional environment and ongoing macroeconomic challenges, the company reaffirmed its adjusted diluted earnings guidance for the year at $2.55 to $2.90 per share.

"During the second quarter, we delivered strong earnings performance in a challenging consumer environment," said chairman and chief executive officer Tony Spring.

"Our colleagues executed with discipline, supporting gross margin expansion and effective expense control throughout the organisation."

Spring said the company was seeing signs of its strategy "taking root", including two consecutive quarters of positive comparable sales in Macy's 'First 50' locations.

"We are encouraged by the early traction of our 'Bold New Chapter', and remain committed to returning Macy's to sustainable profitable growth."

At 0814 EDT (1314 BST), shares in Macy's were down 7.27% in premarket trading in New York, at $16.45.

They had closed down 0.45% on Tuesday, before the results announcement, at $17.74.

Reporting by Josh White for Sharecast.com.