Macy’s Cautious and Conservative for 2023
Macy’s Inc., despite the promotional-charged and competitive retail landscape, forecasts that its fourth-quarter sales and profits will fall within its guidance issued last November.
However, after experiencing deeper-than-expected business lulls during nonpeak periods in December, sales could be at the low end or middle of the guidance, the retailer disclosed Friday.
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In the report, chairman and chief executive officer Jeff Gennette praised his team for operating with “precision and agility” as it managed through the challenging quarter, but also sounded a note of caution about the year ahead.
“Based on current macroeconomic indicators and our proprietary credit card data, we believe the consumer will continue to be pressured in 2023, particularly in the first half, and have planned inventory mix and depth of initial buys accordingly,” Gennette said Friday.
Macy’s fourth-quarter net sales are now expected to be at the low end to midpoint of the previously issued range of $8.16 billion to $8.4 billion. Adjusted diluted earnings per share are expected to be in the previously issued range of $1.47 to $1.67.
Macy’s fourth quarter ends Jan. 28. The company expects to report full results for the fourth quarter and fiscal year 2022 in early March. The guidance for the period was provided during the company’s Nov. 17, 2022, earnings call on the third quarter.
On a percentage basis, total end-of-quarter inventories are on track to be slightly below last year and down midteens relative to 2019.
Macy’s forecast, issued after the stock market closed, pulled the stock price down 4.25 percent, or $0.94 to $21.19.
“Our teams executed well during a competitive holiday season. In an environment when discretionary spending was under pressure, we operated with precision and agility,” said Gennette. “Black Friday/Cyber Monday sales were in line with our expectations, while the week leading up to and following Christmas were ahead.
“However, the lulls of the nonpeak holiday weeks were deeper than anticipated. Overall, our occasion apparel and gift-giving business were strengths and inventory composition and price points aligned with customers’ needs. Throughout the season, Bloomingdale’s and Bluemercury continued to outperform. Across nameplates, we stayed close to our customer, utilizing data and analytics tools to respond to shifts in demand. This has contributed to clean inventories and an expected gross margin rate roughly in line with previously issued fourth-quarter guidance.”
Gennette added that the company takes “a balanced approach to merchandise receipts and remains committed to offering fashion and value across nameplates and channels, with the capacity to adjust in-season buys and chase into areas of strength. As we look further ahead, the efficiencies we’ve built into our business coupled with our financial health, data-driven decision processes, and agile ways of working allow us to operate from a position of strength while continuing to invest in our future.”
Last week, Macy’s notified workers in four Macy’s department stores that their locations would close. Liquidation sales, which will last eight to 12 weeks, began at the sites. The four Macy’s to close are in the Baldwin Hills Crenshaw Plaza in Los Angeles; Foothills Mall in Fort Collins, Colorado; Lakeforest Mall in Gaithersburg, Maryland, and Windward Center in Kaneohe, Hawaii.
In February 2020, Macy’s launched its Polaris strategy, centering on personalization and the loyalty program; expanding assortments; accelerating digital growth; growing its private brand business, closing 125 department stores representing $1.4 billion in sales, and opening smaller specialized stores including Bloomies, which will open its third unit later this year, and Market by Macy’s, which In 2022, opened four locations bringing the total number of this format to eight. Macy’s Backstage, the off-price format, has nine freestanding units, as well as about 300 set ups inside Macy’s stores.
As of last year, about 70 of the 125 department stores were shut, but Macy’s has slowed down the closing process as stores became more integrated into fulfilling online orders and offering the buy online and pickup in store option, and shoppers, tired of being cooped up at home and glued to their computers, began returning to physical stores in greater numbers.
Gennette, along with Adrian Mitchell, chief financial officer, and Nata Dvir, Macy’s chief merchandising officer, will be participating Monday in the 2023 ICR Conference in Orlando, Florida. The company is scheduled to hold meetings beginning Sunday.
