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Macy's Cuts Sales Forecast Amid Softening Consumer Demand

Macy's, the iconic department store chain, has lowered its full-year sales forecast, citing a shift in consumer behavior towards more selective shopping and an increase in promotions. The announcement comes after the company reported mixed second-quarter results, exceeding earnings expectations but falling short on revenue.

• Macy's now projects net sales between $22.1 billion and $22.4 billion, down from its previous estimate of $22.3 billion to $22.9 billion.
• This revised forecast represents a year-over-year decline from the $23.09 billion reported in fiscal 2023.
• Comparable sales, which adjust for store openings and closures, are expected to range from a decrease of 2% to a decline of 0.5%, compared to the prior forecast of a decline of 1% to a gain of 1.5%.

Impact of Consumer Behavior on Macy's Performance

Macy's CEO Tony Spring highlighted a noticeable shift in consumer spending across all the company's brands, including its upscale Bloomingdale's division. Customers are exhibiting a more cautious approach, delaying purchases even in higher-end segments.

• Customers are responding to promotions and new products, but overall spending remains below previous levels, even among affluent consumers.
• External factors such as rising interest rates, inconsistent weather patterns, and a busy news cycle are influencing consumer behavior.

Macy's Second-Quarter Earnings and Revenue

Here's a breakdown of Macy's second-quarter performance compared to Wall Street's expectations:

Metric	Macy's Report	Analyst Expectations
Earnings Per Share (Adjusted)	53 cents	30 cents
Revenue	$4.94 billion	$5.12 billion

Following the release of these results, Macy's stock closed nearly 13% lower on Wednesday.

Macy's Turnaround Efforts and Store Optimization

Macy's is actively pursuing a turnaround strategy aimed at achieving steadier growth. This strategy includes:

• Shuttering approximately 150, or nearly a third, of its namesake stores by early 2027, focusing investment on the remaining 350 locations.
• Opening smaller Macy's stores in suburban strip malls.
• Expanding the presence of its better-performing brands, Bloomingdale's and Bluemercury.

Despite these efforts, recent results indicate challenges in achieving a comeback in a demanding retail environment where consumers are increasingly selective.

Weak Performance of Macy's Namesake Brand

Macy's namesake brand continues to struggle, with comparable sales declining 3.6% on an owned-plus-licensed basis, including the third-party marketplace.

• Bloomingdale's experienced a comparable sales decline of 1.4%, while Bluemercury achieved a 2% increase, marking its 14th consecutive quarter of growth.
• Even when excluding the stores slated for closure, comparable sales for the remaining Macy's stores and online sales fell by 3.3%.

Macy's Turnaround Progress and Future Plans

Macy's emphasizes progress made in its turnaround plan, particularly at the first 50 stores receiving additional investment, where comparable sales rose by 1%.

• These 50 stores have outperformed other Macy's locations, even in challenging categories like handbags.
• The company plans to expand this strategy to more stores in the fourth quarter.
• Macy's has decided to increase staffing in women's shoes and handbags departments due to positive customer response.

Macy's Stock Performance and Market Capitalization

Shares of Macy's closed at $15.45 on Wednesday, resulting in a market capitalization of $4.3 billion. The stock is down about 23% year-to-date, lagging behind the S&P 500's gain of over 17% during the same period.