Macy's Shares Jump After Holiday-Quarter Profit Tops Expectations

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  • Macy's reported a bigger profit than expected during the holiday quarter.
  • The department store operator said it is planning for a choppier year ahead.
  • Macy's plans to open more off-mall stores and grow its luxury business.

Macy's shares jumped Thursday, as the company said it drew holiday shoppers looking for gifts and held the line on promotions.

But the department store operator, which includes higher-end banner Bloomingdale's and beauty chain Bluemercury, said it is still planning for a choppier year ahead.

Macy's said it expects net sales to decline in a range of 1% to 3% in the fiscal year compared with 2022, which would translate to between $23.7 billion and $24.2 billion. It said it expects its adjusted diluted earnings per share will range from $3.67 to $4.11.

The company's shares closed 11% higher on Thursday.

On a call with investors, CEO Jeff Gennette said Macy's anticipates discretionary spending to remain under pressure as consumers "continue shifting towards services and essential goods."

In the coming year, he said Macy's is focused on driving sales by refreshing its private brands, opening more off-mall stores, and growing its luxury business and online marketplace.

Here's how Macy's did for its three-month period that ended Jan. 28 compared with what analysts were anticipating, based on Refinitiv estimates:

  • Earnings per share: $1.71 adjusted vs. $1.57 expected
  • Revenue: $8.26 expected vs. $8.26 billion expected

Net income for the fourth quarter fell to $508 million, or $1.83 per share, from $742 million, or $2.44 a share, a year earlier. The company reported adjusted earnings per share of $1.88. Excluding a tax benefit, it delivered adjusted earnings per share of $1.71, higher than the $1.57 that analysts expected, according to Refinitiv. Revenue fell nearly 5% from $8.67 billion a year earlier.

Comparable sales on an owned-plus-licensed basis were down 2.7% during the period from a year ago, but up 3.3% versus the fourth quarter in 2019.

Macy's results signal that sales patterns picked up in the final weeks of the quarter. In early January, the company had shared early holiday numbers. At the time, it said it expected its sales to come in on the lighter side of expectations. The company said it had noticed customers watching their spending more carefully and buying fewer items for themselves while shopping for gifts in November and December.

Macy's has stood out from other retailers in another way: it hasn't coped with the same glut of unsold goods. At the end of the fourth quarter, its inventory was down about 3% versus a year ago and down about 18% compared with 2019.

That meant the retailer had less merchandise to sell at a deep discount, even as it had to compete with retailers running lots of sales.

In the holiday quarter, Gennette said in a news release that the company was "competitive but measured in our promotions, took strategic markdowns and intentionally did not chase unprofitable sales."

Bloomingdale's and Bluemercury have been the strongest parts of the company's business. Bloomingdale's comparable sales rose 0.6% year over year on an owned-plus-licensed basis, as shoppers bought dressy clothing and beauty merchandise. Bluemercury's comparable sales rose 7.2% on an owned basis, as shoppers sought newer and more colorful makeup along with skin-care merchandise.

At Macy's stores and on its website, the company said it noticed "the impacts of macroeconomic pressures" in the fiscal fourth quarter. Yet it said it saw strength in sales for gift-giving and occasion-based items like men's tailored apparel, dresses and beauty merchandise. Sales of activewear, casual clothing and home goods like blankets, pillows and towels declined versus the prior year.

As of Thursday's close, Macy's shares are now up 10% this year, outpacing the S&P 500, which rose by about 4% during the same period. The company's shares closed at $22.70 on Wednesday, bringing Macy's market cap to about $6.15 billion.

Read the full Macy's earnings release.

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