Macy’s cuts sales forecast as department stores struggle to draw shoppers

Macy’s cut its full-year sales forecast Wednesday, as the department store operator said it is contending with selective shoppers and more promotions.

The retailer posted a mixed quarter, as it topped Wall Street’s earnings expectations but missed on revenue.

Macy’s said it now anticipates net sales of between $22.1 billion and $22.4 billion, which is lower than the $22.3 billion to $22.9 billion range it had previously anticipated. That also would be a year-over-year decline from the $23.09 billion it reported for fiscal 2023.

Macy’s expects comparable sales, which take out the impact of store openings and closures, to range from a decrease of about 2% to a decline of about 0.5%. It had previously expected comparable sales to range from a decline of about 1% to a gain of 1.5%. That metric includes owned and licensed sales, which encompass merchandise that Macy’s owns and items from brands that pay for space within its stores, along with Macy’s third-party online marketplace.

The department store operator said in a news release that the new outlook range “gives the flexibility to address the ongoing uncertainty in the discretionary consumer market.”

In an interview with CNBC, CEO Tony Spring said customers aren’t spending as freely across all of Macy’s brands — even higher-end department store Bloomingdale’s.

“We see that there is definitely a softness, a carefulness, a delay in the conversion of purchasing,” he said. “And people on the things that they want, the things that are priced sharply, on the newness, they’re responding, but even the affluent consumer is not spending like they were a year ago.”

He said “there’s a lot of noise out there,” which is distracting customers or causing them to hold off on spending, including higher interest rates, inconsistent weather patterns and a busy news cycle.

Here’s what Macy’s reported for the fiscal second quarter compared with what Wall Street expected, based on a survey of analysts by LSEG:

• Earnings per share: 53 cents adjusted vs. 30 cents expected
• Revenue: $4.94 billion vs. $5.12 billion expected

Shares of the company fell more than 9% in premarket trading.

The iconic department store is pushing to get back to steadier footing and sustained growth. Spring announced in February that the retailer would shutter about 150 – or nearly a third – of its namesake stores and invest in the roughly 350 locations that remain. It plans to close the locations by early 2027. 

It is also opening new, smaller Macy’s stores in suburban strip malls and adding locations of its better-performing brands, Bloomingdale’s and Bluemercury.

Yet Macy’s results in the recent quarter revealed its struggles to pull off that comeback at a time when consumers have been pickier about purchases – especially items that are wants rather than needs. 

Net sales fell from $5.13 billion in the year-ago period.

The namesake Macy’s brand continued to be the company’s weakest performer. Comparable sales fell 3.6% on an owned-plus-licensed basis, including the third-party marketplace. 

At Bloomingdale’s, comparable sales declined 1.4% on an owned-plus-licensed basis, including the third-party marketplace. And Bluemercury comparable sales rose 2%, marking the 14th consecutive quarter of comparable sales growth for the beauty brand.

In the three-month period that ended Aug. 3, Macy’s net income was $150 million, or 53 cents per share, compared with a loss of $22 million, or 8 cents per share, in the year-ago period.

Yet even when excluding the weaker stores that Macy’s is shutting, sales were lackluster. Comparable sales for its go-forward namesake brand – which includes the Macy’s stores that will remain open and online sales – declined 3.3% on an owned-plus-licensed basis, including the third-party marketplace. 

Macy’s stressed it has made progress in its turnaround plan, which it unveiled in February soon after Spring stepped into the company’s top role. At the first 50 of its stores to get additional investment, comparable sales were up 1% on an owned-plus-licensed basis. It marked the second consecutive quarter of positive comparable sales at those stores since the plan started.

Spring said those 50 stores have outperformed Macy’s other locations, even in hard-hit categories like handbags. He said the company will share its plans for expanding the strategy beyond those stores in the fourth quarter, but it’s already decided it will bulk up staffing in the women’s shoes and handbags departments at more of its locations because of the customer response.

Along with a choppy sales environment, Macy’s leaders had also faced a bid by an activist group to take the company private. Macy’s said last month that its board had unanimously decided to end negotiations with Arkhouse Management and Brigade Capital.

Shares of Macy’s closed Tuesday at $17.74, bringing the company’s market cap to $4.9 billion. As of Tuesday’s close, the company’s stock is down about 12% so far this year. That trails behind the approximately 17% gains of the S&P 500 during the same period.