Macy’s, Inc. reported third-quarter results that topped analysts’ estimates and boosted its guidance for the year.

Earnings per share in the quarter of 52 cents adjusted handily topped Wall Street’s consensus target of 19 cents. Revenue of $5.23 billion was in line with Wall Street’s consensus target of $5.2 billion.

“Our Polaris strategy is working. In the third quarter, we achieved solid top-line results and a strong beat to our bottom-line guidance. Macy’s brand position as a style and fashion source resonated with our customers, while luxury continued to outperform at Bloomingdale’s and Bluemercury,” said Jeff Gennette, chairman and chief executive officer, Macy’s, Inc. “Retail is detail, and our talented and agile team are executing well to compete. We know the consumer is under increasing pressure and has choices on where to spend. As a leading gifting destination with fresh inventory across the value spectrum, we are ready to meet our customers’ needs this holiday season.”

“We are operating from a position of strong financial health with appropriate levels of inventory, a strong balance sheet with ample liquidity, investment grade credit metrics and fixed interest rate debt in a rising interest rate environment. We have the tools, data-driven processes and talented teams to manage through this uncertain time and are committed to long-term, profitable growth,” added Adrian Mitchell, chief financial officer, Macy’s, Inc.

Third Quarter Highlights
(comparisons are to third quarter 2021 unless noted otherwise and comparisons to 2019 are provided, where appropriate, to benchmark performance given the impact of the pandemic.)

  • Diluted earnings per share of $0.39 and Adjusted diluted earnings per share of $0.52. This compares to diluted earnings per share of $0.76 and Adjusted diluted earnings per share of $1.23 in the third quarter of 2021. This compares to diluted earnings per share of $0.01 and Adjusted diluted earnings per share of $0.07 in the third quarter of 2019.
  • Net sales of $5.2 billion, down 3.9 percent versus the third quarter of 2021, up 1.1 percent versus the third quarter of 2019. Digital sales decreased 9 percent versus the third quarter of 2021, up 35 percent versus the third quarter of 2019. Brick-and-mortar sales decreased 1 percent versus the third quarter of 2021, down 9 percent versus the third quarter of 2019.
  • Comparable sales were down 3.1 percent on an owned basis and down 2.7 percent on an owned-plus-licensed basis; up 5.6 percent and 6.0 percent, respectively, versus the third quarter of 2019.

Highlights Macy’s Nameplates Include:

  • Macy’s comparable sales were down 4.4 percent on an owned basis and down 4.0 percent, on an owned-plus-licensed basis. 43.6 million active customers shopped the Macy’s brand, on a trailing twelve-month basis, a 2 percent increase compared to the prior year. Macy’s Star Rewards program members made up approximately 70 percent of the total Macy’s brand-owned-plus-licensed sales on a trailing twelve-month basis, up approximately 5 percentage points versus the prior year. The company continued to see strength in occasion-based categories, including career and tailored sportswear, fragrances, shoes, dresses, and luggage. Results were driven by strength across women’s, men’s and kid’s contemporary and dressy apparel, women’s shoes as well as luggage.
  • Bloomingdale’s comparable sales on an owned basis were up 5.3 percent and on an owned-plus-licensed basis were up 4.1 percent.4.1 million active customers shopped the Bloomingdale’s brand, on a trailing twelve-month basis, a 9 percent increase over the prior year.
  • Bluemercury comparable sales were up 14.0 percent on an owned and owned-plus-licensed basis. Approximately 650,000 active customers shopped the Bluemercury brand, on a trailing twelve-month basis, a 15 percent increase over the prior year.

Inventory turnover, on a trailing twelve-month basis, was relatively flat to 2021 and improved 15 percent over 2019. Inventory was up 4 percent year-over-year and down 12 percent versus 2019, reflecting disciplined inventory management in an environment of continued supply chain volatility and industry-wide elevated inventory levels, as well as lean inventory levels experienced in 2021. The company strategically brought in seasonal merchandise earlier to strengthen its competitive position for Holiday and has the added capacity to chase in-season trends.

Gross margin for the quarter was 38.7 percent, down from 41.0 percent in the third quarter of 2021. Merchandise margin decline was driven by a year-over-year increase in promotional and permanent markdowns within the Macy’s brand, as the company sold through slower-moving categories including casual apparel, soft home, and warmer weather seasonal goods. Delivery expense, as a percent of net sales, was relatively consistent with the prior year. Higher fuel costs more than offset the impact of a 2-percentage point decline in digital penetration and reductions in cost-per-package.

SG&A expenses of $2.1 billion, an $84 million increase. SG&A expense as a percent of sales was 39.3 percent, 300 basis points higher compared to the third quarter of 2021 and an improvement of 330 basis points compared to the third quarter of 2019. The prior year’s quarter benefited from a significant number of open positions due to the tight labor market. The positions have since largely been filled. The company is adjusting colleague compensation to remain competitive and attract the best talent, while simultaneously remaining disciplined in its SG&A productivity efforts.

Net credit card revenue of $206 million, down $7 million. Represented 3.9 percent of sales, in line with the prior year period. Performance driven by lower-than-expected bad debt levels, larger balances within the portfolio as well as higher-than-expected spend on co-brand credit cards.

2022 Guidance
Macy’s raised its adjusted diluted earnings per share to a range of $4.07 to $4.27, up from its previous guidance of $4.00 to $4.20. Guidance o sale were unchanged in the range of $24,340 million to $24,580 million. Guidance for adjusted EBITDA as a percent of sales was unchanged at approximately 10.5 percent.

Photo courtesy Macy’s