Macy's Exceeds Q4 Expectations, Cautions on 2024 Outlook Amid Market Uncertainties
Macy's reported strong fourth-quarter results that surpassed Wall Street's expectations for both sales and profit, while simultaneously issuing a cautious financial outlook for the upcoming year. The company's namesake brand notably showed signs of progress during this period.
Fiscal Year 2024 Projections Reflect Declines
For the fiscal year, Macy's, which includes its namesake chain, Bloomingdale's, and Bluemercury, anticipates sales to be in the range of $21.4 billion to $21.65 billion. Adjusted earnings per share are projected between $1.90 and $2.10.
These figures represent a decrease from the prior fiscal year's revenue of $21.8 billion and adjusted earnings per share of $2.15. While the sales outlook generally met or surpassed analysts' expectations of $21.42 billion, the adjusted earnings guidance fell short of Wall Street's forecast of $2.17 per share.
Macy's expects comparable sales, an industry metric that adjusts for factors like store openings and closures, to fluctuate between a 0.5% decline and a 0.5% increase for the fiscal year.
CEO Highlights Strategy Effectiveness and Shopper Resiliency
CEO Tony Spring stated that the company's strategy is proving effective, citing growth across all three brands in both the fiscal year and the holiday quarter. This marks the fourth consecutive quarter that Macy's has surpassed Wall Street's sales guidance.
For the first time in three years, Macy's achieved positive comparable sales growth, increasing 1.5% for the full year. Spring also noted "continued resiliency" among Macy's shoppers, who are spending on new clothing, brands, and trendier items.
Despite these positive trends, Spring indicated that new market uncertainties make predicting the year ahead more challenging, leading the company to adopt a "prudent" approach with its outlook. He mentioned external factors such as gas prices, ongoing geopolitical conflicts, and potential changes in tariffs as influences.
Outlook Incorporates Macroeconomic and Geopolitical Factors
The company's full-year guidance incorporates "macroeconomic and geopolitical factors that could influence discretionary spend." The outlook anticipates a greater impact from tariffs in the first half of the year, with the first quarter experiencing the most significant effect.
It also includes the impact of ongoing investments in store renovations and the effect of fewer planned store closures. Spring confirmed that the forecast assumes the pre-Supreme Court ruling level of tariffs, expecting the company's tariff bill to ease later in the year due to comparisons with the previous year's impact. Any refunds or reductions in tariffs would constitute a benefit for Macy's.
Strong Fourth Quarter Performance Exceeds Analyst Expectations
For the fiscal fourth quarter, which concluded on January 31, Macy's reported adjusted earnings per share of $1.67, exceeding the $1.53 expected by analysts. Revenue reached $7.64 billion, compared to the $7.62 billion anticipated.
Net income for the three-month period rose to $507 million, or $1.84 per share, up from $342 million, or $1.21 per share, in the comparable year-ago period. Total sales decreased from $7.77 billion in the year-ago quarter.
"Bold New Chapter" Strategy Progress
Macy's is currently in the second year of a three-year "Bold New Chapter" strategy aimed at strengthening its core brand, leveraging Bloomingdale's and Bluemercury, and enhancing its supply chain and technology operations. As part of this initiative, Macy's plans to close approximately 150 of its namesake stores, representing over a quarter of its locations, by early 2027.
Company-wide comparable sales for the fourth quarter increased by 1.8%, encompassing both owned and licensed merchandise, and its third-party marketplace. The Macy's namesake banner alone saw comparable sales grow by 0.4%, increasing to 0.6% when considering only stores slated to remain open. Bloomingdale's comparable sales jumped by 9.9%, and Bluemercury's grew by 1.3%.
Investing in the Store Experience
Under CEO Tony Spring's leadership, Macy's has sought to address prior criticisms concerning outdated merchandise, inadequate staffing, and disorganized displays. The company is investing in the approximately 350 Macy's stores that will continue operating, by enhancing staffing, introducing new brands, and refining visual merchandising.
At 125 locations where these investments have been implemented, sales outperformed the rest of the Macy's chain, with comparable sales growth of 0.9%. This investment strategy is set to expand to an additional 75 stores, bringing the total number of "reimagined" locations to 200.
Stock Performance Snapshot
Shares of Macy's closed at $16.92, resulting in a market value of $4.5 billion. Over the past year, the company's stock has risen by nearly 25%, outperforming the S&P 500's approximately 20% gain during the same period. However, year-to-date, Macy's shares have experienced a decline of about 23%.