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Macy’s Inc.’s stock erased early losses to trade flat Thursday, after the department-store chain posted weaker-than-expected fiscal first-quarter sales and cut its full-year guidance to reflect a challenged consumer.
The New York-based company
M,
posted net income of $155 million, or 56 cents a share, for the quarter to April 29, down from $286 million, or 98 cents a share, in the year-earlier period. Adjusted per-share earnings were also 56 cents, ahead of the 45-cent FactSet consensus.
Sales fell to $4.982 billion from $5.348 billion, below the $5.014 billion FactSet consensus. Same-store sales fell 7.2%, while FactSet expected a decline of 5.5%.
“We planned the year assuming that the economic health of the consumer would be challenged, but starting in late March, demand trends weakened further in our discretionary categories,” CEO Jeff Gennette said in a statement.
That has been a common refrain among retailers this earnings season, as consumers grappling with higher costs for essentials like food and gas were holding off on purchases of non-essentials, with clothing taking a particularly strong hit.
On a call with analysts, Gennette said the weakness had further deteriorated in April, and credited it to cooler temperatures, headlines about job cuts and the banking crisis.
“The U.S. consumer particularly at Macy’s pulled back more than we anticipated as they reallocated spend-to-food, essentials, and services,” he said.
The namesake Macy’s brand has the largest exposure to the lower and middle-income consumer with roughly 50% of its identified customers at an average household income of $75,000 or under, and about 85% at $150,000 or under, he said.
On a brighter note, the company found categories that are less weather dependent such as beauty, notably fragrances, women’s “career sportswear,” and men’s tailored clothing outperformed, while certain pandemic categories such as tech and housewares staged a comeback.
CFRA analyst Zachary Warring reiterated his hold rating on the stock and cut his price target to $19 from $27.
“Macy’s continues to battle long-term headwinds and even with its low valuation we see better options in retail,” he wrote in a note.
Macy’s said it has moved to meet weakened demand and manage costs and expects $200 million of incremental cost savings to be realized in fiscal 2023.
The company’s higher-end brands, Bloomingdale’s and Bluemercury, were also hit by macro pressures but not at the same scale as Macy’s, he said. Bloomingdale’s sales were down 2.3% and same-store sales fell 4.3%. Bluemercury sales rose 4.4% and same-store sales were up 4.3%, driven by strength in clinical and medical skincare and color.
The company also lowered its guidance to reflect “anticipated macroeconomic impacts to the consumer.”
“Our revised guidance reflects incremental clearance markdowns to address excess spring seasonal merchandise in the second quarter, along with adjustments to the category composition and inventory levels in the back half of the year,” Gennette said.
Macy’s is now expecting full-year sales to range from $22.8 billion to $23.2 billion, down from prior guidance of $23.7 billion to $24.2 billion. It expects adjusted EPS to range from $2.70 to $3.20, down from prior guidance of $3.67 to $4.11.
Same-store sales are expected to fall 7.5% to 6%, compared with prior guidance of down 4% to 2%.
The stock has fallen 34% in the year to date, while the S&P 500
SPX,
has gained 9%.
See also: Hibbett profit and sales fall below estimates as shoppers buy footwear but shun apparel
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