Macy’s slashed its annual sales forecast on disappointing second quarter earnings as the iconic department store struggles to win over inflation-battered customers.
Macy’s shares plunged 13.4% on Wednesday morning.
The retailer has been forced to cut prices and offer more promotions on its mid- to high-end goods to compete with affordable rivals — but it still lost out on sales.
The company maintained its annual profit expectations.
The everyday shopper has pivoted to prioritize value, turning to big-box competitors offering low prices on essentials like Target and Walmart.
The two chains recently raised their yearly forecasts on high earnings that beat estimates.
Now, all eyes are on Macy’s new CEO Tony Spring and his plan to turn around the company with his plan, “A Bold New Chapter” — which means shuttering stores and boosting its luxury business.
The pressure is on after Macy’s last month ended its talks with Arkhouse Management and Brigade Capital to go private for $6.9 billion in July, saying the offer failed to provide “compelling value.”
Macy’s announced in February it was shutting down 150 stores — about 30% of its namesake chain.
“Macy’s has been attritioning store traffic and sales for several quarters – this isn’t a surprise to investors,” Hitha Herzog, chief research officer at H Squared Research and part time faculty at Parsons School of Design, told The Post.
“The expectation on Spring to turn the sales and traffic problem around is high, and as we inch closer to his year tenure, his ability to deliver will be scrutinized.”
The retailer on Wednesday predicted its current third quarter earnings would also disappoint.
Although shoppers are in the midst of a busy buying season, many are turning to retailers with low prices to afford their back-to-school shopping lists.
Macy’s lowered its annual net sales expectations between $22.1 billion to $22.4 billion, down from its earlier forecast of $22.3 billion to $22.9 billion.
The company said it dropped its yearly outlook to reflect a “more discriminating consumer” and “address the ongoing uncertainty” in the market.
Second quarter net sales dropped 3.8% to $4.9 billion, a greater fall than the 0.23% dip to $5.1 billion predicted by LSEG analysts.
Comparable sales fell 1.1% in its Bloomingdale’s business – down from a 0.8% rise in the previous quarter.
Macy’s has been struggling to hold on to customers and boost earnings as prices have soared.
Macy’s struggle to capture cost-conscious customers comes down to its outdated store format, Herzog said.
“The stores are massive, the product offerings are not compelling and when you combine that with a price sensitive customer, you don’t see a sales conversion,” Herzog told The Post. “Focusing on smaller format stores might help, but the days of people shopping and spending a day in an enormous store in its current format are over.”
Spring – a longtime Bloomingdale’s executive – took the helm at Macy’s in February with a plan to turn the chain around by closing underperforming Macy’s stores and focusing on Bloomingdale’s and Bluemercury.
The retailer saw some growth in its luxury cosmetic business in the second quarter, as Bluemercury comparable sales grew 2% in the second quarter.
Spring’s strategy of focusing on the company’s affluent customers led to an increase in store traffic and sales, Herzog said.
“These shoppers are less likely to feel the impact of higher prices and somewhat immune to a price increase on their favorite lipstick, face cream or handbag,” Herzog told The Post.
Spring praised the second quarter performance and said the company is “committed to returning Macy’s, Inc. to sustainable profitable growth.”
It reported adjusted earnings per share of 53 cents, beating expectations of 30 cents and up from 26 cents in the same quarter last year.
Macy’s reported a gross margin rate of 40.5%, which beat expectations thanks to lower costs.
