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Macy’s (M) Q3 2022 earnings

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Macy’s flagship store in Herald Square in Latest York, Dec. 23, 2021.

Scott Mlyn | CNBC

Macy’s on Thursday raised its earnings forecast for the 12 months as strong luxury sales boosted the department store operator’s quarter and fresh merchandise arrived for the vacations.

The corporate left its revenue guidance unchanged though, after trimming projections in August, because it faces a tougher sales backdrop through the retail industry’s most vital quarter. The updated outlook got here after Macy’s reported third-quarter revenue and earnings that topped Wall Street expectations.

Shares of Macy’s were up greater than 12% in morning trading.

In an interview with CNBC, Macy’s CEO Jeff Gennette said the corporate can hold the road on prices since it has fresh merchandise. That has allowed it to herald recent apparel, home goods and other gift-giving items. He said it isn’t seeing customers trade right down to cheaper brands.

Nevertheless, he said Macy’s did see a drop in sales in the ultimate weeks of October and early November. Store and website visits remained the identical — however the browsing didn’t lead to purchasing. Previously week, he said, Macy’s has seen a return to a greater performance.

“Is that a slowdown in the patron confidence that we’re going to take during the fourth quarter?” Gennette said. “Or is it going back to the 2019 buying patterns when those weeks I’m quoting were actually consistent with the trend we had before ramping into Christmas this 12 months? At once, we’re watching it very fastidiously.”

Here’s how Macy’s did in its fiscal third quarter compared with what analysts were anticipating, based on Refinitiv estimates:

  • Earnings per share: 52 cents adjusted vs. 19 cents expected
  • Revenue: $5.23 billion vs. $5.2 billion expected

For the three month period ended Oct. 29, Macy’s said Thursday that its net income fell to $108 million, or 39 cents per share unadjusted, down from $239 million, or 76 cents per share, a 12 months earlier.

Macy’s is attempting to refresh its business, on top of navigating a fast-changing economic backdrop. It’s in the course of turnaround plan, dubbed Polaris, which has included store closures, investments in e-commerce and efforts to attract younger customers to its stores.

Compared with other retail players, Macy’s has missed out on huge gains in sales through the Covid pandemic — at the same time as shoppers spent stimulus checks. Its revenue has remained relatively flat, coming in at $5.17 billion through the third quarter of 2019, at $3.99 billion within the third quarter of 2020 and at $5.4 billion within the third quarter of 2021. That compares with $5.23 billion within the third quarter of this 12 months.

Comparable sales on an owned-plus-licensed basis fell 2.7% through the period from a 12 months ago. That was higher than 4.3% decline that Wall Street expected, in response to Refinitiv.

Still, Macy’s is in a greater spot than a lot of its competitors when it comes to inventory. Its inventory level was up 7% 12 months over 12 months within the second quarter and up 4% 12 months over 12 months within the third quarter. Compared with 2019 levels, its inventory within the third quarter was down 12% — a mirrored image of sharper management of products, and out-of-stocks and shortages in the sooner a part of the pandemic.

Spending shifts

The retailer has seen a shift in what individuals are buying up to now few quarters, as shoppers bought dressier attire as a substitute of the pajamas, workout clothes and residential goods like bedding that they loaded up on earlier within the pandemic, Gennette said. That pattern held in recent months, he said.

Luxury, particularly, was some extent of strength through the quarter. Shoppers turned to Macy’s beauty chain, Bluemercury, and higher-end department store chain, Bloomingdale’s, to purchase recent clothing, shoes and makeup. Those banners outperformed the remainder of the corporate.

At Bloomingdale’s, comparable sales on an owned-plus-licensed basis were up 4.1%, as shoppers bought dressy clothing, women’s shoes and luggage.

At Bluemercury, comparable sales on an owned-plus-licensed basis rose 14%.

Gennette said the corporate advantages from having store banners with a big selection of price points — so shoppers can select a high-end fragrance after which a lower-priced shirt from a non-public label.

Heading into the important thing holiday shopping season, Macy’s is facing inflation that is hovering at a near four-decade high. The corporate cut its full-year revenue and earnings per share forecast in August, saying it anticipates shoppers may spend less on discretionary merchandise like apparel as they pay more for groceries, housing and gas.

Earlier this week, industry watchers got fresh clues in regards to the health of the patron. Each Walmart and Goal reported a noticeable pullback of sales in categories like apparel, electronics and residential goods as shoppers spent more on necessities. Goal slashed its forecast for the vacation quarter, saying weaker sales have continued into November.

Macy’s, in contrast, stood by the revenue guidance it gave in August, saying it still expects a spread of $24.34 billion to $24.58 billion for the fiscal 12 months. It raised its annual adjusted earnings per share forecast to $4.07 to $4.27 per share, up from its previous range of $4 to $4.20. 

As of Wednesday’s close, Macy’s shares are down about 25% thus far this 12 months. The stock closed Wednesday at $19.71, down about 8%.

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